September 9, Re: Complaints by Gerrick Brenner filed February 24 and 25, 2016.

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1 Mailing Address: P.O. Box Raleigh, NC Phone: (919) Fax: (919) KIM WESTBROOK STRACH Executive Director September 9, 2016 VIA ELECTRONIC MAIL Progress North Carolina Action c/o Michael L. Weisel Capital Law Group Gerrick Brenner Progress North Carolina Action The Pat McCrory Committee Holtzman Vogel Josefiak Torchinsky, PLLC c/o Jason Torchinsky Connect NC Committee Connect NC Committee, Inc. c/o Steven B. Long Parker Poe Adams & Bernstein, LLP Committee to Elect Ken Goodman c/o R. Bruce Thompson, II All: Re: Complaints by Gerrick Brenner filed February 24 and 25, The State Board of Elections has completed its investigation in connection with the above-referenced complaints. Enclosed, please find copies of the report of our agency. Thank you for your cooperation throughout this investigation. Sincerely, Kimberly Westbrook Strach Executive Director, North Carolina State Board of Elections 6400 Mail Service Center Raleigh, NC N. Harrington Street Raleigh, NC

2 NC State Board of Elections CAMPAIGN FINANCE INVESTIGATION FINDINGS REPORT: Complaints filed by Gerrick Brenner 1 COMPLAINTS On February 24, 2016, Gerrick Brenner filed a sworn complaint alleging violations of campaign finance laws by Connect NC Committee, Connect NC Committee, Inc., and The Pat McCrory Committee. On February 25, 2016, Mr. Brenner filed an additional complaint incorporating his complaint from the previous day and adding additional alleged violations by Connect NC Committee, Connect NC Committee, Inc. and the Committee to Elect Ken Goodman. The complaints are included with this report as Exhibit A and B. Counsel for Connect NC provided a response to the complaints on March 2, (Exhibit C) Counsel for The Pat McCrory Committee provided a response to the complaint on March 2, (Exhibit D) Counsel for the Committee to Elect Ken Goodman provided a response to the complaint on March 3, (Exhibit E) 2 ADVISORY OPINIONS Several advisory opinions issued by Executive Director Kim Strach are directly relevant to the allegations made in the above referenced complaints. A brief review of the issues addressed in those opinions and how they relate to the alleged violations will provide essential background for details that inform our investigative findings. Attorney Michael Weisel submitted a written request to Executive Director Strach pursuant to G.S and dated October 29, 2015, seeking guidance regarding the scope of Article 22A of Chapter 163 of the General Statutes concerning electioneering communications. Mr. Weisel 1

3 noted in his request that he represented the interests of several clients that are nonprofit corporations organized under sections 501(c)(3) or 501(c)(4) of the Internal Revenue Code and North Carolina referendum committees. Mr. Weisel s letter stated that his clients plans ahead of the election cycle involved efforts to educate the general public about a proposed Connect NC referendum on a $2 billion debt package, as well as plans to urge passage of the bond referendum that would be held March 15, The request letter concluded with a series of questions. On December 4, 2015, Strach provided an advisory opinion that addressed each question in sequence. (Exhibit F) The key points of the December 4, 2015, response (herein, the Weisel advisory opinion ) that relate to the two complaints identified above are as follows: 1) a candidate cannot control a referendum committee, and 2) a candidate cannot coordinate expenditures with a referendum committee. In response to the Weisel advisory opinion, counsel for Connect NC Committee, Steve Long, requested further consideration of its content. (Exhibit G) Mr. Long contended that it would only be impermissible for a candidate to coordinate with a referendum committee if the content of the coordinated expenditure expressly advocated for the election of the coordinating candidate. Mr. Long indicated that since Connect NC Committee did not have any intentions of supporting any candidate for political office, it would not be impermissible for candidates to coordinate with Connect NC Committee on communications that support the passage of the bond referendum. Mr. Long s letter also requested specific guidance on permissible conduct for the referendum committee with respect to interactions with candidates. On December 18, 2015, Executive Director Strach responded to Mr. Long s request, confirming that, as provided in the Weisel advisory opinion, communication paid for by the referendum committee and coordinated with a candidate that expressly advocated for the passage of the bond referendum and also included language that the coordinating candidate supported the passage of the bond referendum would be considered a contribution to that candidate, and that such a contribution would likely be impermissible if the referendum committee had accepted 2

4 contributions that were not permissible for the candidate. However, Ms. Strach s response to Mr. Long clarified that a communication paid for by the referendum committee that was coordinated with a candidate but did not expressly advocate for the passage of the bond referendum would be considered a coordinated expenditure but would not be considered a contribution to that candidate. (Exhibit H) Under such circumstances, coordination to produce an informational presentation would not constitute an impermissible contribution. On December 29, Ms. Strach provided another letter to Mr. Long that addressed his request for guidance regarding specific conduct that a referendum committee could engage in with candidates without coordinating with the referendum committee. (Exhibit I) Specifically, Mr. Long asked if the referendum committee could interview candidates on the spot at their public events and use the video/audio of the interviews in communications without triggering a coordinated expenditure that would be a contribution to the candidates. Ms. Strach s guidance provided that interviewing a candidate and using the footage would be permissible as long as the candidate is not provided a script, given approval of a script or comments, advised or provided any details regarding how the content of the interviews will be used in communications by the Referendum Committee. 3 ALLEGED VIOLATIONS The complaints allege that The Pat McCrory Committee and the Committee to Elect Ken Goodman coordinated with the Connect NC referendum committee on advertisements advocating for the passage of the bond referendum. Additionally, the complaints allege that The Pat McCrory Committee used footage paid for by Connect NC in an advertisement paid for by The Pat McCrory Committee. If the allegations made in the complaints proved to be true, The Pat McCrory Committee and the Committee to Elect Ken Goodman would be deemed to have received impermissible contributions. 3

5 4 INVESTIGATION FINDINGS CONNECT NC Ads On March 9, 2016, Ms. Strach conducted a telephone interview with film maker and media consultant Neil Kammerman, who had been hired by Connect NC to conduct on-camera interviews of various elected and government officials regarding their support for the bond initiative. Mr. Kammerman stated that he was not employed by, nor doing any work for any of the candidates or government officials. Mr. Kammerman also stated that he had read the advisory opinion and subsequent letter to Steve Long prior to conducting the on-camera interviews, and that he was mindful of the contents of those opinions for the purpose of ensuring that the on-camera interviews complied with their provisions. 1 He confirmed that no script or questions were provided to anyone in advance of the on-camera interviews. He further advised that all preparations for the set where the interviews were to take place were made in advance of all of the interviews. According to Mr. Kammerman, the interviews with Governor McCrory and Representative Goodman took place at the same time and place of the kick-off event held on January 5, 2016, and that it was he who made the arrangements to interview Governor McCrory and Representative Goodman. Connect NC hired two consulting firms, Cornerstone Solutions (owned by Chris Sinclair and Alistair Macaulay) and Campaign Connections (owned by Brad Crone). Neither the consultants nor any member of their staff were present at the on-camera interviews. According to Mr. Kammerman, Governor McCrory was accompanied by former Budget Director, Lee Roberts, Chief Legal Counsel to Governor McCrory, Bob Stephens, and North Carolina Department of Commerce Secretary John Skvarla. Representative Goodman attended his oncamera interview alone. Mr. Kammerman stated that no candidate, nor anyone present at the 1 Mr. Kammerman recalled that at the end of Governor McCrory s interview, he asked Governor McCrory if he could ask viewers to vote for the bond initiative, just as Governor McCrory had done earlier that day at the kickoff event. He said as soon as he asked the question, Bob Stephens stated that Governor McCrory could not comply with that request. Mr. Kammerman stated that he was embarrassed that he had asked the question because he realized that Mr. Stephens was ensuring compliance with the written opinions, even though Mr. Kammerman was only trying to prompt Governor McCrory to make a statement he had made earlier during his public speech. 4

6 interviews, nor anyone on either candidate s behalf at any time prior to the interview or after the interview provided any input or direction as to the filming or footage used for the advertisements. Mr. Kammerman stated that he had been directed by Cornerstone Solutions to mail the footage of the interviews to FP1 Strategies, a DC advertising company. He stated that he did not keep a copy of the footage. Mr. Kammerman said that after he sent the interviews to the directed address, he had no further role in the process. We have found no evidence that The Pat McCrory Committee or the Committee to Elect Ken Goodman had any contact or relationship with FP1 Strategies. Common Vendors In Mr. Brenner s initial complaint of February 24, 2016, he alleged that the Connect NC McCrory ad and the McCrory Committee s Keep Pounding ad contained similar footage and fonts that suggested the use of common vendors, which could indicate coordination between Connect NC and The Pat McCrory Committee. On March 2, 2016, Mr. Weisel submitted a letter (Exhibit J) in response to the March 2, 2016 answer to complaint allegations from Connect NC. In his letter, Mr. Weisel provided information that again addressed common vendor concerns. He included TV buy sheets from local television stations that show that Connect NC and The Pat McCrory Committee both used the same vendor to purchase air time. The buy sheet from WTVD indicates that Strategic Media Placement at 7669 Stagers Loop, Delaware, Ohio purchased air time for The Pat McCrory Committee for February 5, 2016 through February 8, A buy sheet from WRAL indicates that Strategic Media Placement at the same address also purchased air time for Connect NC for February 24, 2016 through February 27, Committee disclosure reports filed by Connect NC do not show an expenditure to Strategic Media Placement at 7669 Stagers Loop, Delaware, Ohio. Instead, the disclosure report shows an expenditure to Strategic Media Services, Inc. at 1911 North Ft. Myer Drive Suite 400, Arlington, Virginia. 5

7 Compliance Specialist Sheryll Harris contacted WRAL and asked staff to review their records for this buy from Connect NC. After review, WRAL advised that they had made a data entry mistake when entering the buy into their system and had inadvertently populated the buy with an incorrect vendor. WRAL provided our office with a corrected buy sheet that reflected Strategic Media Services, Inc. as the vendor for Connect NC. (Exhibit K) Executive Director Strach contacted legal counsel for The Pat McCrory Committee to confirm that no common vendor was involved with the Keep Pounding ad. On behalf of The Pat McCrory Committee, attorney Jason Torchinsky submitted a response that included sworn statements from the two vendors involved with the creation and ad placement of Keep Pounding. These statements confirm that neither vendor used by The Pat McCrory Committee coordinated or communicated in any way with Connect NC or anyone on their behalf. (Exhibit L) We have no evidence to suggest that the vendors used by The Pat McCrory Committee are or were in any way affiliated with Connect NC s vendor, Strategic Media Services, Inc. 5 CONCLUSION After a thorough investigation, 2 we find no evidence that The Pat McCrory Committee or the Committee to Elect Ken Goodman coordinated with Connect NC on the ads identified in the complaints filed by Mr. Brenner. All evidence indicates that the guidance provided in the advisory opinion of December 4, 2015 and the response to Steve Long on December 18, 2015 was followed in compliance with North Carolina campaign finance laws. We have no evidence that The Pat McCrory Committee or its vendors coordinated with anyone on behalf of Connect NC in their production or airing of Keep Pounding. We have no evidence that Governor McCrory or The Pat McCrory Committee controlled the operations of the Connect NC referendum committee. We have no evidence that any other candidate had control over the operations of the referendum committee. 2 Incident to the State Board s review of disclosures associated with Connect NC Committee, agency staff on May 18, 2016 transmitted documents to the Office of Management and Budget identifying contribution descriptions associated with certain colleges and universities for review under OMB Circular A-21 (2 C.F.R. 220 (2005)). 6

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