Federal Election Commission Main Page
January 17, 1997
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1996-49
William H. Boger
Wilkinson, Barker, Knauer & Quinn
1735 New York Avenue, N.W.
Washington, D.C. 20006-5209
Dear Mr. Boger:
This responds to your letter dated November 8, 1996, as
supplemented by your letters dated December 12 and 20, 1996,
requesting an advisory opinion on behalf of PrimeCo
Personal Communications, L.P. ("PrimeCo") concerning the
application of the Federal Election Campaign Act of 1971, as
amended ("the Act"), and Commission regulations to the
relationship between a political committee established by
PrimeCo and other political committees.
Your request presents the situation of the
establishment of a political committee by a joint venture
partnership owned indirectly by corporations that are
connected organizations of a number of separate segregated
funds (SSFs). You ask whether the partnership's PAC would
be affiliated with those committees and the effects of any
affiliated relationship.
Factual Background
PrimeCo was established as of October 20, 1994, as a
non-corporate joint venture partnership by PCSCO Partnership
("PCSCO") and PCS Nucleus, L.P. ("PCSN"), pursuant to the
Delaware Revised Uniform Limited Partnership Act. PCSCO and
PCSN each hold a 50 percent partnership interest in PrimeCo,
including a 20 percent general partnership interest for
each.
PCSN is a Delaware Limited Partnership which is 50
percent owned by AirTouch Communications ("AirTouch"), a
California corporation, and 50 percent owned by US West, a
Colorado corporation. PCSCO is a Delaware General
Partnership which is indirectly owned (50/50) by NYNEX
Corporation ("NYNEX"), through a wholly-owned subsidiary and
by Bell Atlantic Corporation ("Bell Atlantic"), through a
wholly-owned subsidiary. (PCSCO and PCSN will hereafter be
referred to as the "partners" or each separately as a
"partner," and the corporations making up these partnerships
will be referred to as "constituent corporations.") PrimeCo
was formed by the constituent corporations to acquire,
manage and maintain personal communications services ("PCS")
licenses.
On April 21, 1996, Bell Atlantic Corporation and NYNEX
announced an agreement to merge their corporations. The
resulting corporation will be known as Bell Atlantic
Corporation.1 For the purposes of this opinion, the
Commission will assume that the merger is effective.
According to the Agreement of Limited Partnership for
PrimeCo ("Partnership Agreement"), an Executive Committee,
composed of six persons, is responsible for managing the
business affairs of PrimeCo, including hiring top personnel,
and delegating responsibilities to officers, employees,
agents and representatives as appropriate. Partnership
Agreement, 5.1.1 and 5.1.9. Each general partner (i.e.,
PCSCO and PCSN) has the right to select three members of the
Executive Committee. Each member must be an officer or
former employee of the partner or an affiliate of the
partner, and may be removed or replaced by the partner that
made the appointment. Partnership Agreement, 5.1.2. Three
members of the Executive Committee represent Bell Atlantic
(and NYNEX), and three represent AirTouch and US West.
Presently, the members consist of three present high level
executives from Bell Atlantic and NYNEX, two from Air Touch,
and one from US West.2
The Partnership Agreement spells out the decision-
making process of the Executive Committee. If only one
member appointed by a general partner is present (or
participates by proxy), that member may exercise "the entire
voting power" held by all members appointed by that partner.
If more than one member (appointed by a general partner) is
present, that partner's entire voting power is voted by
those members as a single unit. If there is a disagreement
among a general partner's members, the vote of the member
designated by that partner as its senior representative is
controlling and the vote of the other members representing
that partner is disregarded with respect to the matter.
Partnership Agreement, 5.1.7. The Partnership Agreement
provides that any action of the Executive Committee requires
the affirmative vote of the members representing each of the
general partners, except as specifically provided by the
agreement. Partnership Agreement, 5.1.8.
The Partnership Agreement lists eleven specific actions
requiring an Executive Committee vote and the affirmative
vote of each partner.3 These actions include the admission
of a new partner; PrimeCo's engagement in any business other
than the personal communications services business; amending
the agreement; dissolution or initiation of bankruptcy;
major acquisitions or dispositions of property or assets;
approval or material modification of a one-year or five-year
Business Plan; the making of a request for additional
contributions of capital to the partnership ("Capital Call")
other than as provided for in a Business Plan; appointment,
removal, and compensation of PrimeCo's three top executive
officers; and entry into material transactions outside the
scope of the Business Plan, or any other material deviation
from the Business Plan. Partnership Agreement, 5.1.9.
With respect to PCSN, the partner that is still owned
by two constituent corporations, you have stated that the
PCSN partnership agreement makes no provision for picking a
senior representative, as to whether this person will be a
senior representative for all votes, or as to which
corporation will provide the senior representative. You
state that, thus far, there has been no need to utilize the
voting procedures and a senior representative for PCSN has
not been picked. Moreover, there is no provision in that
agreement or any other agreement for determining how the
three PrimeCo Executive Committee memberships from PCSN will
be apportioned.
The Partnership Agreement also provides for a two-stage
procedure to break a deadlock between the partners in
certain disputes pertaining to approval of an annual
business plan, the choice of PrimeCo's CEO, and Capital
Calls.4 First, each partner refers the matter to a CEO from
one of its constituent corporations designated by that
partner to resolve the matter. If the designated CEOs from
each partner cannot agree within 20 days of the referral,
the CEOs of each of the constituent corporations attempt to
resolve the dispute. If there is no agreement within 40 days
after that, the matter is defeated. Partnership Agreement,
5.1.12. You state that it has not been necessary to
resolve an Executive Committee deadlock, and there is no
procedure set out in the PCSN partnership agreement for
choosing the CEO for the first stage.
Although certain officers and employees of PrimeCo are
former employees of the constituent corporations, you note
that, with the exception of the Executive Committee members,
PrimeCo shares no executive or administrative personnel, or
other employees, with either the partners or the constituent
corporations. In addition, there are no formal or informal
agreements in place that any PrimeCo officers or employees
will return to the constituent corporations after working at
PrimeCo for a set period of time.
You state that neither PCSCO nor PCSN has established a
political committee, but that each of the four constituent
corporations, along with entities affiliated with some of
the corporations, has established at least one political
committee.5
You describe PrimeCo's reasons for establishing a
political committee. You state that PrimeCo's purpose, i.e,
the acquisition, management, and maintenance of PCS
licenses, is a separate and distinct line of business from
that engaged in by the partners or the constituent
corporations. You maintain that PrimeCo's political
interests can, and often do, differ from those of the
constituent corporations, and thus it "seeks to have an
independent and distinct voice on political issues." To
that end, PrimeCo's officers and employees intend to
establish a non-connected political committee. It would
solicit contributions from PrimeCo's officers and employees,
but not from the officers or employees of PCSCO, PSCN, or
the constituent corporations. It is also PrimeCo's "intent"
that the SSFs of the constituent corporations will not
solicit contributions from PrimeCo's officers or employees.
Questions Presented
You ask a number of questions pertaining to the
question of affiliation and its consequences which the
Commission restates and reorders as follows:
(1) Would PrimeCo's "non-connected political
committee" be affiliated with the SSFs of the constituent
corporations?
(2) If PrimeCo's PAC is affiliated with one or more of
the SSFs, may PrimeCo's PAC solicit contributions from the
officers and employees of those SSFs' connected
organizations?
(3) If PrimeCo's PAC is considered to be affiliated
with one or more of the SSFs, may the affiliated SSFs'
connected organizations pay the expenses of PrimeCo's PAC?
(4) May PrimeCo establish an SSF?
Legal Analysis
The Commission's response to these questions is divided
into two parts. The first part will address question one,
i.e., whether PrimeCo's PAC would be affiliated with the
committees of the constituent corporations. The second part
will address the consequences of any such affiliation in
response to questions two through four.
A. The Affiliated Entities
The Act and Commission regulations provide that
committees, including separate segregated funds, that are
established, financed, maintained or controlled by the same
corporation, person, or group of persons, including any
parent, subsidiary, branch, division, department, or local
unit thereof, are affiliated. 2 U.S.C. 441a(a)(5); 11 CFR
100.5(g)(2). Contributions made to or by such committees
shall be considered to have been made to or by a single
committee. 2 U.S.C. 441a(a)(5); 11 CFR 100.5(g)(2),
110.3(a)(1), and 110.3(a)(1)(ii). In addition, a
corporation may make communications to and solicit the
restricted class (i.e., executive and administrative
personnel and stockholders, and the families thereof) of its
subsidiaries or other affiliates for contributions to the
corporation's separate segregated fund. 2 U.S.C.
441b(b)(2)(A) and (4)(A)(i); 11 CFR 114.3(a)(1) and
114.5(g)(1). The Commission has long held that affiliates
may include entities other than corporations, such as
partnerships. Advisory Opinions 1994-11, 1992-17, 1989-8,
1987-34, and 1983-48. See also Advisory Opinion 1996-38.
Where an entity is not an acknowledged subsidiary of
another entity, as in 11 CFR 110.3(a)(2)(i),6 Commission
regulations provide for an examination of various factors in
the context of an overall relationship to determine whether
one company is an affiliate of another and, hence, whether
their respective SSFs are affiliated with each other. 11
CFR 100.5(g)(4)(i) and (ii)(A)-(J), and 110.3(a)(3)(i) and
(ii)(A)-(J).7
The relevant factors in the situation you have
presented are as follows: (B) whether a sponsoring
organization has the authority or ability to direct or
participate in the governance of another sponsoring
organization through provisions of constitutions, by-laws,
contracts or other rules, or through formal or informal
practices or procedures; (C) whether a sponsoring
organization has the authority or ability to hire, appoint,
demote or otherwise control the officers, or other
decisionmaking employees of another sponsoring organization;
(E) whether a sponsoring organization has common or
overlapping officers or employees with another sponsoring
organization which indicates a formal or ongoing
relationship between the organizations; (F) whether a
sponsoring organization has any members, officers, or
employees who were members, officers, or employees of
another sponsoring organization which indicates a formal or
ongoing relationship or the creation of a successor entity;
and (I) whether a sponsoring organization had an active or
significant role in the formation of another sponsoring
organization. 11 CFR 110.3(a)(3)(ii)(B), (C), (E), (F), and
(I).8
Bell Atlantic, along with its wholly-owned subsidiary
NYNEX, exercises 50 percent control of the Executive
Committee through its ownership of PCSCO, a PrimeCo partner.
The Executive Committee is the governing body of PrimeCo.
As indicated in the Partnership Agreement provisions
described above, the assent of the members appointed by
PCSCO is necessary for the PrimeCo Executive Committee to
take a significant number of major actions. These are
actions that determine how the officers and employees of
PrimeCo will conduct business operations and the
appointment, removal, and compensation of top executive
officers. The Executive Committee itself includes the Chief
Operating Officer of Bell Atlantic and two other high
ranking officers of Bell Atlantic affiliates. With respect
to the final factor listed above, Bell Atlantic was one of
the creators of PrimeCo.
The position of Bell Atlantic in PrimeCo is similar to
the positions of the corporate owners of a joint venture
partnership in Advisory Opinion 1992-17. In that opinion,
two corporations each had a fifty percent interest in the
partnership. The Board of the partnership consisted of
three senior officers of each of the two corporations who
represented their respective corporations. The Commission
concluded that, although neither partner had the predominant
management role or a controlling position, each corporation
was affiliated with the partnership and thus their SSFs were
each affiliated with the partnership's PAC. The Commission
noted the presence of the high-ranking corporate officers on
the Board, the creation of the partnership by the
corporations , and the fact that the assent of each
corporation was necessary in order to make a significant
number of major decisions. Similar circumstances are
present in your request and the Commission concludes that
PrimeCo is an affiliate of Bell Atlantic. Although the Act
does not specifically provide for the establishment by
partnerships of SSFs, the Commission has concluded that a
PAC established and sponsored by a partnership is affiliated
with the SSF of an affiliated corporation. Advisory
Opinions 1994-9, 1992-17, and 1989-8. The Commission
concludes, therefore, that PrimeCo's PAC would be affiliated
with the committees established by Bell Atlantic and its
affiliated entities, including NYNEX. The PAC's statement
of organization should list Bell Atlantic Corporation PAC,
the political committee established by the top-level parent
entity, as an affiliated committee. 2 U.S.C. 433(b)(2); 11
CFR 102.2(b)(1)(ii)(B).
The Commission does not reach the same conclusion with
respect to PrimeCo's PAC and the committees established by
AirTouch, US West, and its affiliates. In view of the fact
that the Executive Committee members from either AirTouch or
US West could conceivably exercise a veto power over the
vote exercised by PCSN, and thus affect the Executive
Committee's ability to make a decision, the Commission
acknowledges that there may be a basis for affiliating the
two corporations with the partnership's PAC. However, there
are a number of factors weighing against such a conclusion.
First, unlike Bell Atlantic, each corporation by itself does
not carry the full vote necessary to prevent the Executive
Committee from taking an action. Moreover, although either
AirTouch or US West could conceivably obstruct an
affirmative vote by the PCSN side, this would occur at a
secondary voting level, rather than the primary level
exercised by the two corporations together.9 Second, at
this secondary level of decisionmaking, the powers that each
corporation exercises on a consistent basis are speculative,
due to the fact that there are, and have been, no
arrangements for selecting a deciding senior representative
for PCSN or a CEO for the first stage of resolution in a
deadlock event.10 The Commission emphasizes that its
conclusion is based on the combination of the factors, and
that each of those factors might not, by itself, be
sufficient to lead to a conclusion of non-affiliation.
B. The Consequences of Affiliation
Although PACs sponsored by partnerships (as non-
connected committees) do not normally carry the same
restrictions on solicitations that SSFs do, a PAC of a
partnership that is an affiliate of a corporation that has
an SSF may not make solicitations to an unlimited class, but
is limited in a way that a corporate SSF would be. Advisory
Opinions 1992-17 and 1989-8. See 11 CFR 114.5(g)(1). As a
result of the affiliation of PrimeCo with Bell Atlantic and
the affiliation of their respective political committees,
PrimeCo's PAC may solicit contributions from PrimeCo's
executive and administrative personnel and the families
thereof. It may, if desired, also solicit the executive and
administrative personnel and stockholders, and families
thereof, of Bell Atlantic, Bell Atlantic's subsidiaries
(such as NYNEX), and other entities that are affiliated with
Bell Atlantic under 11 CFR 110.3(a)(3). It may not solicit
the personnel, stockholders, or families thereof, of Air
Touch or US West, or their subsidiaries and affiliates.
Since PrimeCo's PAC and the political committees of Bell
Atlantic and its subsidiaries and affiliates are considered
to be one committee for the purpose of contribution
limitations, contributions to all of those committees must
be aggregated with each other and all contributions by those
committees must be aggregated with each other.
Under 2 U.S.C. 441b(b)(2)(C), a corporation may use
its general treasury funds to pay for the costs of
establishing, administering, or soliciting contributions to
its SSF, without a resultant contribution or expenditure.
See also 2 U.S.C. 431(8)(B)(vi) and (9)(B)(v). In
applying this law in the context of affiliation, the
Commission has permitted a corporation that is affiliated
with another corporation to pay the administration and
solicitation costs of the latter corporation's SSF.
Advisory Opinions 1996-26 and 1983-19. Similarly, it has
permitted incorporated entities to pay such costs for the
political committees of its affiliated entities that are not
incorporated. Advisory Opinions 1996-38 and 1992-17.
Therefore, Bell Atlantic may pay for the establishment,
administration, and solicitation costs for PrimeCo's PAC.
In that event, the PAC would be an SSF of Bell Atlantic.
See 2 U.S.C. 431(7) and 11 CFR 100.6(a).
With respect to the ability of PrimeCo itself to
establish an SSF, the Commission notes that the Act does not
extend to a partnership the ability granted to a corporation
at 2 U.S.C. 441b(b)(2)(C) to conduct itself as a connected
organization and avail itself of the exemptions. Advisory
Opinions 1991-1 and 1990-20. See also California Medical
Association v. Federal Election Commission, 453 U.S. 182
(1981). Nevertheless, the Commission has treated joint
venture partnerships differently as a result of the
partnership's ownership by, and affiliation with,
corporations. Advisory Opinions 1994-11, 1994-9, 1992-17,
and 1987-34. If a partnership is owned entirely by
corporations and affiliated with at least one of them, it
may perform the functions of a connected organization for
its PAC. Advisory Opinions 1994-11, 1994-9, and 1992-17.
Therefore, PrimeCo may pay the establishment,
administration, and solicitation costs of PrimeCo's PAC
without a resulting contribution from PrimeCo.
Even though the Commission has concluded that a
partnership can perform the functions of a connected
organization under the above-described circumstances,
Commission regulations defining "connected organization" do
not include partnerships. 11 CFR 100.6(a). Bell Atlantic
would be the connected organization of PrimeCo's PAC and
would pay for the exempt costs either by itself or through
PrimeCo. Advisory Opinions 1994-11 and 1992-17. If such
support is provided directly by Bell Atlantic or its
affiliates, or indirectly by Bell Atlantic by virtue of
support from PrimeCo, then PrimeCo's PAC should amend its
statement of organization and identify Bell Atlantic as its
connected organization. 2 U.S.C. 433(b)(2); 11 CFR
102.2(b)(2).
In that event, the name of PrimeCo's PAC would have to
include the name "Bell Atlantic Corporation." 2 U.S.C.
432(e)(5). For example, the PAC's name could be
PrimeCo/Bell Atlantic Corporation Political Action
Committee. See Advisory Opinions 1994-11 and 1989-8.
Additionally, PrimeCo's PAC may use a clearly recognized
abbreviation or acronym by which the company is commonly
known (e.g., PrimeCo PAC) provided that the PAC's full name
and such abbreviation are included on the PAC's Statement of
Organization, on all its disclosure reports, and in all its
disclaimers under 11 CFR 110.11. 11 CFR 102.14(c).11 The
PAC may make contributions using the abbreviated name by
itself, and the Commission has explicitly permitted the use
of the abbreviation by itself for documents such as checks
and letterheads. 11 CFR 102.14(c); Advisory Opinion 1980-
23. Moreover, Commission regulations do not require the use
of the full name on solicitations of the restricted class of
the company.
This response constitutes an advisory opinion
concerning the application of the Act, or regulations
prescribed by the Commission, to the specific transaction or
activity set forth in your request. See 2 U.S.C. 437f.
Sincerely,
(signed)
John Warren McGarry
Chairman
Enclosures (AOs 1996-38, 1996-26, 1995-36, 1994-11, 1994-9,
1992-17, 1991-1,
1990-20, 1989-8, 1987-34, 1983-48, 1983-19, and
1980-23)
_______________________________
1 Regulatory approvals with respect to the merger are
pending from Federal and state agencies and are expected by
the first quarter of 1997. Once the merger is effective,
Bell Atlantic will own 50 percent, rather than 25 percent of
PrimeCo, and NYNEX will remain a wholly-owned subsidiary of
Bell Atlantic.
2 These are the Executive Vice President and Chief
Operating Officer of Bell Atlantic, the President and CEO of
Bell Atlantic Mobile, the President and Group Executive of
NYNEX Worldwide Services, the President and CEO of the US
West Media Group, AirTouch's Vice President for Corporate
Strategy and Development, and the President and CEO of
AirTouch Cellular Operations, who is also the Executive
Committee's Chairman.
3 The preface to this list indicates that the list is not
meant to exclude other powers and authority of the Executive
Committee. Partnership Agreement, 5.1.9.
4 Specifically, the "deadlock events" are: (1) a
disagreement on an annual Business Plan within 90 days of
the next fiscal year (where no Business Plan had been
approved for the current year); (2) a disagreement lasting
for at least 30 days over the removal of a CEO, or a vacancy
in the CEO position lasting more than 30 days after a
partner has proposed a candidate; and (3) a disagreement
lasting for at least 30 days over the timing or amount of a
Capital Call other than as provided for in a Business Plan.
5 Bell Atlantic and its affiliates have established several
committees, including Bell Atlantic Corporation PAC, Bell
Atlantic-Pennsylvania Inc. Federal PAC, New Jersey Bell
Telephone Company Federal PAC, Chesapeake & Potomac
Telephone Co. Federal PAC, and Diamond State Telephone Co.
PAC. NYNEX and its affiliates have established NYNEX
Employees' Federal PAC, New England Telephone & Telegraph
Co. Federal PAC, and New York Telephone Federal PAC. US
West has established US West Inc. PAC and AirTouch has
established AirTouch Communications PAC.
6 According to Commission regulations, committees
established by a single corporation and its subsidiaries are
affiliated per se. 11 CFR 110.3(a)(2)(i).
7 Specifically, the regulations, at 11 CFR 110.3(a)(3)(ii),
state in part:
The Commission will examine these factors in the
context of the overall relationship between
committees or sponsoring organizations to
determine whether the presence of any factor or
factors is evidence of one committee or
organization having been established, financed,
maintained or controlled by another committee or
sponsoring organization.
8 The list of ten circumstantial factors set out at 11 CFR
110.3(a)(3)(ii) is not an exclusive list, and other factors
may be considered. See Advisory Opinion 1995-36.
9 It may be possible to conclude that Air Touch and US
West are affiliated with PrimeCo by virtue of the fact that
each has equal representation and voting power in PCSN and
that PCSN has fifty percent control over PrimeCo. This
conclusion would be reached by stating that PCSN is
affiliated with each of the corporations and PrimeCo is
affiliated with the corporations in a direct line through
its affiliation with PCSN. However, although there is a
partnership agreement for PCSN, it is not an operating
entity and has no officers or employees. It exists only as
a vehicle for investments by Air Touch and US West in "PCS
ventures of mutual interest."
10 The Commission's conclusion as to the affiliated status
of AirTouch or US West might differ if there were
arrangements indicating a senior representative designation
that consistently or predominantly went to one of the two
companies, or if the same were the case with respect to the
choice of CEO in a deadlock event.
11 The applicable regulation states that the SSF may use a
clearly recognized abbreviation or acronym by which the
connected organization is commonly known. Although the
connected organization would be Bell Atlantic, this draft
has explained that PrimeCo may function as an SSF under the
ownership and affiliation circumstances presented. For
purposes of the abbreviation, therefore, PrimeCo's PAC need
not include the Bell Atlantic name.