HB-4001, As Passed Senate, June 27, 2008

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 4001

     A bill to regulate and to require certain reports to be filed

that document contributions for purposes of defending an elected

official in a criminal, civil, or administrative action; to

regulate contributions made for purposes of defending an elected

official in a criminal, civil, or administrative action; to

prescribe certain powers and duties of the secretary of state as to

legal defense funds; and to prescribe criminal penalties and civil

sanctions.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 1. This act shall be known and may be cited as the "legal

defense fund act".

     Sec. 3. As used in this act:

     (a) "Contribution" means a payment, gift, subscription,

assessment, expenditure, contract, payment for services, dues,

advance, forbearance, loan, or donation of money or anything of

ascertainable monetary value, or a transfer of anything of

ascertainable monetary value to a person, made for or allocated to

the purpose of defending an elected official in a criminal, civil,

or administrative action that arises directly out of the conduct of

the elected official's governmental duties. Contribution includes

an officer holder's own money or property, other than the officer

holder's homestead, used on behalf of the officer holder's defense,

the granting of discounts or rebates not available to the general

public, and the endorsing or guaranteeing of a loan for the amount

the endorser or guarantor is liable. Contribution does not include

an offer or tender of a contribution if expressly and

unconditionally rejected, returned, or refunded within 30 business

days after receipt.

     (b) "Elected official" means an individual who holds an

elective office in state or local government in this state.

     (c) "Elective office" means a public office filled by an

election. A person who is appointed to fill a vacancy in a public

office that is ordinarily elective holds an elective office.

Elective office does not include the office of precinct delegate.

Elective office does not include a school board member in a school

district that has a pupil membership of 2,400 or less enrolled on

the most recent pupil membership count day. Elective office does

not include a federal office.

     (d) "Financial institution" means a state or nationally

House Bill No. 4001 as amended June 27, 2008

chartered bank or a state or federally chartered savings and loan

association, savings bank, or credit union whose deposits are

insured by an agency of the United States government and that

maintains a principal office or branch office located in this state

under the laws of this state or the United States.

     (e) "Legal defense fund" means all contributions received,

held, or expended for the legal defense of an elected official. <<For

purposes of this act, a legal defense fund does not include a fund of a local government association that is an exempt organization under section 501(c)(4) of the internal revenue code of 1986, 26 USC 501, or of a local government organization, if money in the organization's fund is composed of money that is excluded from the definition of gross income under section 115(2) of the internal revenue code of 1986, 26 USC 115.>>

     (f) "Person" means a business, individual, proprietorship,

firm, partnership, joint venture, syndicate, business trust, labor

organization, company, corporation, association, committee, or any

other organization or group of persons acting jointly.

     (g) "Treasurer" means the individual designated as responsible

for a legal defense fund's record keeping, report preparation, or

report filing or, in the absence of such an individual, the elected

official who is the beneficiary of the legal defense fund.

     Sec. 5. (1) An elected official who is the beneficiary of a

legal defense fund shall file a statement of organization with the

secretary of state within 10 days after the earlier of the date the

legal defense fund first receives a contribution or first makes an

expenditure of a contribution.

     (2) A statement of organization required by this section shall

include all of the following information:

     (a) The name, street address, and telephone number of the

legal defense fund. The name of the legal defense fund shall

include the first and last names of the elected official who is the

beneficiary of the legal defense fund and the words "legal defense

fund".

     (b) The name, street address, and telephone number of the

individual designated as the treasurer of the legal defense fund.

     (c) The name and address of the financial institution in which

money of the legal defense fund is or is intended to be deposited.

     (d) The full name of and office held by the elected official

who is the beneficiary of the legal defense fund.

     (e) A description of the criminal, civil, or administrative

action arising directly out of the conduct of the elected

official's duties for which a contribution to or expenditure from

the legal defense fund was made.

     (3) If any of the information required in a statement of

organization under this section changes, the legal defense fund

shall file an amended statement of organization when the next

transaction report under section 7 is required to be filed.

     (4) An elected official who fails to file a statement of

organization as required by this section shall pay a late filing

fee of $10.00 for each business day the statement remains unfiled.

A late filing fee shall not exceed $300.00. An elected official who

fails to file a statement of organization under this subsection is

guilty of a misdemeanor punishable by imprisonment for not more

than 93 days or a fine of not more than $1,000.00, or both.

     (5) When a legal defense fund is dissolved, the elected

official shall file a statement of dissolution with the secretary

of state, in the form required by the secretary of state, and shall

return any unexpended funds to the contributor of the funds or

forward the unexpended funds to the state treasurer for deposit

into the general fund of the state or to the state bar of Michigan

for deposit into the state bar of Michigan client protection fund.

     Sec. 7. (1) From the earlier of the date that a legal defense

fund receives its first contribution or makes its first expenditure

of a contribution until the date the elected official files a

statement of dissolution under section 5, the treasurer of a legal

defense fund shall file transaction reports according to the

schedule in subsection (2). A transaction report shall disclose all

of the following information:

     (a) The legal defense fund's name, address, and telephone

number and the full name, residential and business addresses, and

telephone numbers of the legal defense fund's treasurer.

     (b) The following information about each person from whom a

contribution is received during the covered period:

     (i) The person's full name.

     (ii) The person's street address.

     (iii) The amount contributed.

     (iv) The date on which each contribution was received.

     (v) The cumulative amount contributed by that person.

     (vi) If the person is an individual whose cumulative

contributions are more than $100.00, the person's occupation,

employer, and principal place of business.

     (c) The following information itemized as to each expenditure

from the legal defense fund that exceeds $50.00 and as to

expenditures made to 1 person that cumulatively total $50.00 or

more during a covered period:

     (i) The amount of the expenditure.

     (ii) The name and address of the person to whom the expenditure

is made.

     (iii) The purpose of the expenditure.

     (iv) The date of the expenditure.

     (2) Subject to subsections (3) and (4), the treasurer of a

legal defense fund shall file a transaction report on or before

each of the following dates covering the period beginning on the

day after the closing date of the preceding transaction report and

ending on the indicated closing date:

     (a) January 25, with a closing date of December 31 of the

previous year.

     (b) April 25, with a closing date of March 31.

     (c) July 25, with a closing date of June 30.

     (d) October 25, with a closing date of September 30.

     (3) The beginning date of the first transaction report

required by this section shall be the date the first contribution

is received by the legal defense fund.

     (4) The treasurer of a legal defense fund shall file a final

transaction report with its statement of dissolution under section

5. The final transaction report shall cover the period beginning on

the day after the closing date of the preceding transaction report

and ending on the latest date that the legal defense fund received

a contribution, made an expenditure, or transferred unexpended

funds and dissolved.

     (5) A transaction report required by this section shall

include a verification statement, signed by the treasurer for the

legal defense fund and the elected official, stating that he or she

used all reasonable diligence in preparing the report and that to

his or her knowledge the statement is true and complete.

     (6) A treasurer or other individual designated on the

statement of organization as responsible for the legal defense

fund's record keeping, report preparation, or report filing shall

keep detailed accounts, records, bills, and receipts as required to

substantiate the information contained in a statement or report

required under this act. The records of a legal defense fund shall

be preserved for 5 years and shall be made available for inspection

as authorized by the secretary of state. A treasurer who knowingly

violates this subsection is subject to a civil fine of not more

than $1,000.00.

     (7) A treasurer or elected official who knowingly submits

false information under this section is guilty of a misdemeanor

punishable by imprisonment for not more than 180 days or a fine of

not more than $5,000.00, or both.

     Sec. 9. (1) If a report required by section 7 is filed late,

the legal defense fund or the elected official shall pay a late

filing fee. If the legal defense fund has received contributions of

$10,000.00 or less during the previous 2 years, the late filing fee

shall be $25.00 for each business day the report remains unfiled,

but not to exceed $500.00. If the legal defense fund has received

contributions of more than $10,000.00 during the previous 2 years,

the late filing fee shall be determined as follows, but shall not

exceed $1,000.00:

     (a) Twenty-five dollars for each business day the report

remains unfiled.

     (b) An additional $25.00 for each business day after the first

House Bill No. 4001 as amended June 27, 2008

3 business days the report remains unfiled.

     (c) An additional $50.00 for each business day after the first

10 business days the report remains unfiled.

     (2) A treasurer who fails to file 2 transaction reports

required by section 7, if both of the reports remain unfiled for

more than 30 days, is guilty of a misdemeanor punishable by

imprisonment for not more than <<90 93>> days or a fine of not more than

$1,000.00, or both.

     (3) A treasurer who knowingly files an incomplete transaction

report is subject to a civil fine of not more than $1,000.00.

     Sec. 11. (1) The secretary of state shall make a statement or

report required to be filed under this act available for public

inspection and reproduction, commencing as soon as practicable, but

not later than the third business day following the day on which it

is received, during regular business hours of the filing official.

The secretary of state shall also make the report or all of the

contents of the report available to the public on the internet,

without charge, as soon as practicable, at a single website

established and maintained by the secretary of state.

     (2) A copy of a statement or part of a statement shall be

provided by the secretary of state at a reasonable charge.

     (3) A statement open to the public under this act shall not be

used for any commercial purpose.

     (4) Except as otherwise provided in this subsection, a

statement of organization filed under this act with the secretary

of state shall be preserved by the secretary of state for 15 years

from the official date of the committee's dissolution. Any other

statement or report filed under this act with the secretary of

state shall be preserved by the secretary of state for 15 years

from the date the filing occurred. Upon a determination that a

violation of this act has occurred, all complaints, orders,

decisions, or other documents related to that violation shall be

preserved by the filing official who is not the secretary of state

or the secretary of state for 15 years from the date of the court

determination or the date the violations are corrected, whichever

is later. Statements and reports filed under this act may be

reproduced pursuant to the records media act, 1992 PA 116, MCL

24.401 to 24.406. After the required preservation period, the

statements and reports, or the reproductions of the statements and

reports, may be disposed of in the manner prescribed in the

management and budget act, 1984 PA 431, MCL 18.1101 to 18.1594, and

1913 PA 271, MCL 399.1 to 399.10.

     (5) A charge shall not be collected by a filing official for

the filing of a required statement or report or for a form upon

which the statement or report is to be prepared, except a late

filing fee required by this act.

     (6) The secretary of state shall determine whether a statement

or report filed under this act complies, on its face, with the

requirements of this act. The secretary of state shall determine

whether a statement or report that is required to be filed under

this act is in fact filed. Within 4 business days after the

deadline for filing a statement or report under this act, the

secretary of state shall give notice to the filer by registered

mail of an error or omission in the statement or report and give

notice to a person the secretary of state has reason to believe is

a person required to and who failed to file a statement or report.

A failure to give notice by the secretary of state under this

subsection is not a defense to a criminal action against the person

required to file.

     (7) Within 9 business days after the report or statement is

required to be filed, the filer shall make any corrections in the

statement or report filed with the secretary of state. If the

report or statement was not filed, then the report or statement

shall be late filed within 9 business days after the time it was

required to be filed and shall be subject to late filing fees.

(8) After 9 business days and before 12 business days have

expired after the deadline for filing the statement or report, the

secretary of state shall report errors or omissions that were not

corrected and failures to file to the attorney general.

     (9) A statement or report required to be filed under this act

shall be filed not later than 5 p.m. of the day in which it is

required to be filed. A transaction report that is postmarked by

registered or certified mail, or sent by express mail or other

overnight delivery service, at least 2 days before the deadline for

filing is filed within the prescribed time regardless of when it is

actually delivered. Any other statement or report required to be

filed under this act that is postmarked by registered or certified

mail or sent by express mail or other overnight delivery service on

or before the deadline for filing is filed within the prescribed

time regardless of when it is actually delivered.

     Sec. 13. (1) An elected official, or a person on behalf of an

elected official, shall not solicit or accept a contribution for

the purpose of defending the elected official in a criminal, civil,

or administrative action that arises directly out of the conduct of

the elected official's governmental duties unless the contribution

is included in a legal defense fund that complies with the

requirements of this act.

     (2) A person shall not make and the elected officer or

treasurer of a legal defense fund shall not accept an anonymous

contribution. An anonymous contribution to a legal defense fund

shall not be deposited into the account the legal defense fund

maintains with a financial institution, but shall be given to a

person that is exempt from taxation under section 501(c)(3) of the

internal revenue code, 26 USC 501. The person receiving the

contribution from the legal defense fund shall provide the legal

defense fund with a receipt, which shall be retained by the legal

defense fund's treasurer.

     (3) A contribution shall not be made by a person to another

person with the agreement or arrangement that the person receiving

the contribution will then transfer that contribution to a

particular legal defense fund.

     (4) Contributions to a legal defense fund that are received as

or converted to the form of money, checks, or other negotiable

instruments shall be deposited in a single account in a financial

institution for all contributions to the legal defense fund. The

treasurer of the legal defense fund shall designate the financial

institution that is the official depository of the legal defense

fund. A contribution that is received and retained by a legal

defense fund shall be maintained in a separate account at the

official depository and shall not be deposited in or commingled

with any other account of the elected official.

     (5) A person who knowingly violates this section is guilty of

a misdemeanor punishable as follows:

     (a) If the person is an individual, by imprisonment for not

more than 93 days or a fine of not more than $1,000.00, or both.

     (b) If the person is other than an individual, by a fine of

not more than $10,000.00.

     Sec. 15. (1) Except for expenditures upon dissolution that are

made as prescribed in section 5 or as provided for an anonymous

contribution under section 13, a person shall make expenditures

from a legal defense fund only for administration of the fund,

attorney fees, or related legal costs, which shall not include

direct or indirect payments for media purchases, media consulting,

or mass mailings. An expenditure from a legal defense fund shall be

made for the legal defense of only the 1 elected official for whom

the fund was established.

     (2) A person who knowingly violates this section is guilty of

a misdemeanor punishable as follows:

     (a) If the person is an individual, by imprisonment for not

more than 93 days or a fine of not more than $1,000.00, or both.

     (b) If the person is other than an individual, by a fine of

not more than $10,000.00.

     Sec. 17. This act applies to any contribution made, received,

or expended after the effective date of this act and to any

contribution received before the effective date of this act that

House Bill No. 4001 as amended June 26, 2008

has not been returned to the contributor within 90 days after the

effective date of this act.

     Sec. 19. The secretary of state may promulgate rules to

implement this act and may issue declaratory rulings pursuant to

the administrative procedures act of 1969, 1969 PA 306, MCL 24.201

to 24.328.

<<Enacting section 1. This amendatory act takes effect September 1, 2008.>>

     Enacting section <<2>>. This act does not take effect unless

Senate Bill No. 1263 of the 94th Legislature is enacted into law.