IN RE: HOFFA 2006 CAMPAIGN DEBT.
Protest Decision 2007 ESD 404
Issued: March 28, 2007
On January 26, 2007, Hoffa 2006 filed a debt statement reporting that it was indebted to three campaign vendors in the aggregate amount of $110,396.81. An amended debt statement filed March 5, 2007 showed the aggregate debt to be $110,490.92, viz., $69,922.13 to Financial Innovations, Inc. (FII), $31,494.68 to Ambrosino, Muir & Hansen (AMH), and $9,074.11 to RL Communications (RL). Subsequent communication from the campaign's accountant reported that the debts to RL and AMH were paid in full, respectively, on February 27, 2007 and March 12, 2007. The debt to FII will, according to the campaign, "be paid in full as additional qualified campaign contributions are received."
On March 13, 2007, we wrote to Hoffa campaign counsel as follows:
The Rules, at Definition 5(d), define "extension of credit" as a campaign contribution. The Election Supervisor's Advisory on Campaign Contributions, Expenditures and Disclosure (January 2006) further states that "expenses not paid within sixty days are extensions of credit" (at p. 2). Interest at a commercially reasonable rate must be assessed and paid on extensions of credit. Leedham Slate, 2001 EAD 302 (§11) (April 12, 2001).
Each of the debts itemized in the amended debt statement has been outstanding for more than sixty days and so constitutes an extension of credit for which a commercially reasonable interest rate must be paid. This is the case even though the contract by which the goods or services were obtained does not assess interest on unpaid balances and the employer does not request it; to hold otherwise would permit an interest-free extension of credit, which the Rules prohibit.
We requested that the campaign report the interest amounts it paid on the retired debt and the rates at which interest was and would be calculated on all of its debt.
Campaign counsel responded by email on March 22, 2007 stating that no interest had been paid. Counsel asserted first that no interest was due on any of the campaign's debts because the vendors to which the debt was owed did not as a practice charge interest. Counsel further asserted that the debts did not constitute "extensions of credit" within the meaning of the Advisory because the bills had not aged at least 60 days. Finally, counsel argued that, if interest was to be assessed, it should be waived with respect to the RL and AMH debts as those had been paid; with respect to the FII debt yet to be paid, counsel requested guidance as to what interest rate should be applied.
We have reviewed the invoices for each of the campaign's creditors identified in its debt statements. RL submitted an invoice on November 27, 2006 in the amount of $17,074.11 for services rendered in October and November. The campaign paid $8,000.00 on December 7, 2006, leaving the balance of $9,074.11 that was paid on February 27, 2007. RL's invoice aged 60 days as of January 26, 2007.
AMH's invoice of October 5, 2006 requested payment of $46,494.65 for services rendered in September 2006. The campaign paid $15,000 on November 13, 2006, leaving the balance of $31,494.65, which it paid on March 12, 2007. AMH's October 5 invoice aged 60 days as of December 4, 2006.
FII issued an invoice to "Hoffa Keegel" in the amount of $12,739.84 dated July 12, 2006; this invoice aged 60 days on August 10, 2006 and remains unpaid. On October 4, 2006, FII issued a series of invoices to Hoffa 2006 totaling $28,371.71; these invoices aged 60 days on December 3, 2006 and remain unpaid. Additional invoices totaling $10,016.50 were issued on November 9, 2006; they aged 60 days on January 8, 2007 and remain unpaid. FII issued invoices totaling $18,700.00 on January 3, 2007; these aged 60 days on March 4, 2007 and remain unpaid. Finally, FII issued invoices totaling $94.08 on January 30, 2007; these will age 60 days on March 31, 2007 unless paid before then.
Our review establishes that, except for invoices totaling $94.08 issued by FII on January 30, 2007, all of the unpaid invoices that are the subject of the amended debt statement had remained unpaid for at least 60 days without payment and therefore constituted "extensions of credit" within the meaning of the Advisory.
Given that the invoices constitute extensions of credit, failure of the employers to assess and collect interest on them constitutes an employer contribution prohibited by the Rules. Moreover, failure of the campaign to pay interest constitutes a prohibited receipt of an employer contribution. Leedham Slate, 2001 EAD 302 (§11) (April 12, 2001). We make this finding despite declarations from the vendors involved here that they do not assess interest on past due accounts. The Rules' prohibition on employer contributions, including uncompensated extensions of credit, supersedes any practice to the contrary by particular employers.
We find that a commercially reasonable interest rate is the rate at which commercial banks would make loans to individuals. Research shows that the commercially reasonable rate presently imposed is 10.25% per annum, calculated at the prime interest rate of 8.25% plus 2 percent. While vendor financing of credit may run 1% to 1½% per month (12% to 18% per annum), we find that the lower rate we impose here is commercially reasonable and evinces the Rules' purpose of insulating the electoral process from improper employer influence.
Accordingly, we direct Hoffa 2006 to pay interest on its debt at the rate of 10.25% per annum, commencing on the 61st day each invoice remained unpaid and ending on the date payment is made. For the debt to RL, the interest due totals $81.54. For the debt to AMH, the interest due totals $866.75. For FII, the interest due through the date of this decision totals $2,087.35. Interest will continue to accrue on the unpaid FII invoices in the daily amount of $19.64 so long as the principal remains at $69,922.13; the daily amount of interest will decrease proportionate with each payment Hoffa 2006 makes on the FII debt principal.
By April 6, 2007, we order the Hoffa slate to make the interest payments established in the preceding paragraph to RL and AMH. We further order the Hoffa slate, within 3 working days of such payments, to file an affidavit of compliance, together with copies of the checks and the transmittal letters to the payees. When the checks are cashed, we order the Hoffa slate to file copies of the fronts and backs of the cancelled checks.
With respect to the FII debt, we order the Hoffa slate to make the accrued interest payment established above. We further order the Hoffa slate to calculate and pay daily interest on the unpaid principal at the rate established above, from the date of this decision through the date the debt is finally retired. Such interest payment shall be calculated and made contemporaneous with the final retirement of the FII debt. With respect to this payment of interest, we order the Hoffa slate, within 3 working days of such payment, to file an affidavit of compliance, together with a copy of the interest check and the transmittal letter to the FII. When the interest check is cashed, we order the Hoffa slate to file a copy of the front and back of the cancelled check.
We order no further remedy. Specifically, we do not require the Hoffa slate to amend the CCER it filed in January 2007 to reflect the extensions of credit by the vendors identified here, finding that the debt statement, filed contemporaneously with the CCER, supplied substantially the same information.
Any interested party not satisfied with this determination may request a hearing before the Election Appeals Master within two (2) working days of receipt of this decision. The parties are reminded that, absent extraordinary circumstances, no party may rely upon evidence that was not presented to the Office of the Election Supervisor in any such appeal. Requests for a hearing shall be made in writing, shall specify the basis for the appeal and shall be served upon:
Kenneth Conboy
Election Appeals Master
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022
Fax: (212) 751-4864
Copies of the request for hearing must be served upon the parties, as well as upon the Election Supervisor for the International Brotherhood of Teamsters, 1725 K Street, N.W., Suite 1400, Washington, D.C. 20006-1416, all within the time prescribed above. A copy of the protest must accompany the request for hearing.
Richard W. Mark
Election Supervisor
cc: Kenneth Conboy
2007 ESD 404
DISTRIBUTION LIST (BY EMAIL UNLESS OTHERWISE SPECIFIED):
Bradley T. Raymond, General Counsel
International Brotherhood of Teamsters
25 Louisiana Avenue, NW
Washington, DC 20001-2198
braymond@teamster.org
David J. Hoffa
Hoffa 2006
30300 Northwestern Highway, Suite 324
Farmington Hills, MI 48834
David@hoffapllc.com
Barbara Harvey
645 Griswold Street
Suite 3060
Detroit, MI 48226
blmharvey@sbcglobal.net
Ken Paff
Teamsters for a Democratic Union
P.O. Box 10128
Detroit, MI 48210
ken@tdu.org
Daniel E. Clifton
Lewis, Clifton & Nikolaidis, P.C.
275 Seventh Avenue, Suite 2300
New York, NY 10001
dclifton@lcnlaw.com
Stefan Ostrach
1863 Pioneer Parkway East, #217
Springfield, OR 97477-3907
saostrach@gmail.com
Jeffrey Ellison
510 Highland Avenue, #325
Milford, MI 48381
EllisonEsq@aol.com