The opinion of the court was delivered by: James A. Yates, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the printed Official Reports.
In this Article 78 proceeding, Petitioners challenge a determination by the New York Campaign Finance Board (Board) assessing personal liability for "unspent" campaign funds.*fn1 Petitioner C. Virginia Fields was a candidate for Mayor in the 2005 Democratic primary election. Milton Wilson was the treasurer of New Yorkers for Fields, Ms. Fields' 2005 campaign committee (Committee).
The Board assessed three sums against the Fields campaign:
First, the Board found that the Committee was required to return $330,420 which the Board had overpaid when it matched contributions. Petitioners do not challenge this finding.
Second, the Board assessed a penalty of $36,767 against the Campaign, i.e., the Committee, Mr. Wilson and Ms. Fields. Petitioners do not challenge this finding.
Finally, the Board decided that Ms. Fields, Mr. Wilson, and the Committee are jointly and severally liable for $180,597 in unspent funds, i.e., the amount by which total receipts ($3,286,393), which is the aggregate of both private contributions ($1,826,757) and public funds ($1,459,636), exceeded approved expenditures ($3,105,796). However, included in the calculation of receipts is the $330,420 overpayment, which is to be returned by the Committee. The Board acknowledges that receipts exceed expenditures only if the overpayment continues to be counted as a receipt. If the overpayment is returned by the Committee, then the adjusted public fund contribution is only $1,129,216 and total receipts would equal only $2,955,973, which is less than the amount of approved expenditures. If the overpayment is returned by the Committee there would be no "unspent" funds and Petitioners would have no obligation remaining. Nonetheless, the Board seeks to impose personal liability upon Petitioners Fields and Wilson for unspent funds unless and until the Committee returns the overpayment.
The Fields campaign (Petitioners and the Committee) challenged the finding with a Board Rule 5-02 (a) petition on September 28, 2007. While agreeing to the overpayment calculation, the campaign claimed to have paperwork demonstrating that certain unrecognized expenditures were proper, thereby reducing the unspent funds calculation. The Board, however, refused to consider the additional proof under Board Rule 5-02 (a) (2), finding that no good cause existed for a "late" submission of the documentation. Petitioners offered proof that a necessary accountant became unavailable due to a family death and that computer-related, problems delayed the submission of additional documentation.*fn2 The Board, nonetheless refused to find good cause for the delay and did not recognize the proffered documentation. In its Article 78 petition, the Fields campaign seeks to set aside the Board's finding of personal liability for the $180,597 in unspent funds.
For the following reasons, the Court finds that Ms. Fields and Mr. Wilson are not personally liable for the $180,597, pursuant to the Administrative Code of the City of New York §§ 3-710 (2) (b) and (c), 3-711 (1), and Board Rule 5-02 (a) (2).
Through the New York City Campaign Finance Act (Administrative Code of the City of New York § 3-701 et seq.), the Board provides public matching funds to candidates running for Mayor, Comptroller, Public Advocate, Borough President, and City Council Member.*fn3 To qualify for matching funds, participating candidates must comply with certain requirements. These include source restrictions, campaign contribution limitations, campaign expenditure limits, receipt and expenditure report filings, responses to Board requests for documents, and submissions to Board audits to verify compliance. If the Board determines any portion of the funding was for purposes other than qualified campaign expenditures, it may seek repayment of the disqualified amount. Additionally, the Board may impose a civil penalty of up to $10,000 for any Act or Board Rule violation.
The Board's request for repayment from the Fields campaign began with the 2001 elections. That year, Ms. Fields ran successfully for Manhattan Borough President. She authorized "Fields for New York" as her campaign committee (2001 Committee). Her campaign treasurer was Mr. Wilson. The 2001 Committee received $444,452 in public funds for that election. In the 2001 campaign's final audit report, dated February 24, 2004, the Board ordered the 2001 Committee to repay $92,547. Specifically, the Board assessed $80,678 in unspent campaign funds and $11,869 in penalties.
Board Rule 5-01 (f) (3) provides that a campaign cannot receive public funds if a candidate has an outstanding debt to the Board from a prior campaign. In order to qualify for public funding in 2005, Ms. Fields needed to pay the 2001 debt. On October 7, 2004, prior to application for any public matching funds for the 2005 race, the Fields campaign transferred money from private receipts raised for the 2005 mayoral campaign to the 2001 Committee to pay the $92,547 debt. The transfer was lawful under the Election Law and the Administrative Code.
Almost eight months later, in May 31, 2005, Ms. Fields submitted a certification form to receive public matching funds for her mayoral run in the 2005 Democratic primary election. Ms. Fields designated the Committee as her principal committee, and listed Mr. Wilson as the Committee's Treasurer. Based on its review of the campaign disclosure statements, the Board made three separate public funds payments, on August 4, 2005, August 14, 2005, and September 9, 2005 (prior to the September 13, 2005 primary election). These payments totaled $1,459,636. This amount reflects a four-to-one match for qualified private contributions raised by the Committee. However, it was later determined - and both sides agree - that the $93,000 transfer should have been deducted from the calculation of available qualified receipts before the match was made.*fn4 In essence, contributions are no longer receipts available for matching funds in the 2005 campaign if they are used to pay a pre-existing 2001 debt. Accordingly, the Board overpaid by $330,420 (after adjustments unrelated to this opinion). The Board should have paid $1,129,216.
Following the 2005 general election, the Board conducted a routine audit of the Fields campaign. On December 13, 2006, the Board sent a draft audit report to the Fields campaign. The report found that the campaign owed $187,637 in unspent campaign funds, and $337,340 due to a public funds overpayment.*fn5 The campaign was to respond by January 25, 2007. However, the campaign requested two extensions, first to February 8, 2007, and later to March 8, 2007. The Board granted both extensions. Ultimately, the campaign did not respond to the draft audit report by the March 8th deadline, nor did they request additional time.
On June 11, 2007, the Board sent a notice to the Committee containing a $189,028 demand in penalties and payments. The Board wrote that if it received the campaign's response to the draft audit report no later than June 25, 2007, the campaign would receive substantial penalty reductions. The campaign submitted a response, dated June 26, 2007, to the draft audit ...