Due Diligence Efforts by Committees Upon Receiving a Contribution for Compliance with Campaign and Governmental Conduct Code (C&GC Code) Sections 1.114, 1.126 and 1.127

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Candidates and treasurers for local candidate committees are responsible for complying with campaign finance laws, and may be held jointly and severally liable for violations of those laws. See C&GC Code § 1.170(g), (h). Additionally, under Fair Political Practices Commission Regulation 18427, each candidate and committee treasurer must “verify that to the best of his or her knowledge the committee campaign statements are true and complete and use all reasonable diligence in the preparation of the statements.” See 2 Cal. Code Regs. § 18427. The exact requirements of due diligence vary depending on the facts of a particular situation. For example, a duty to inquire may be triggered in the case of a contribution as a result of the size of the contribution, the reported source, the circumstances surrounding receipt, or the manner in which the contribution is recorded in campaign records.

This information provides guidance for local candidate committees to help ensure compliance with C&GC Code sections 1.114, 1.126 and 1.127. Please refer to the Guide for City Candidates for detailed information on contribution restrictions outlined in sections 1.114, 1.126 and 1.127. At a minimum, to ensure that contributions to candidates do not violate the C&GC Code, the Ethics Commission recommends that candidate committees take the steps listed below. Please note that this is not an exclusive list of questions that a committee should consider in conducting its due diligence; nor does compliance with the factors listed below provide immunity from liability for violations of the law. Please also note that there are other provisions of the law that govern your receipt of campaign contributions. If you have questions regarding a particular transaction, please contact the Ethics Commission at (415) 252-3100.

A. Ask the Following Questions Regarding Each Contribution:

1. Contribution limits generally (C&GC Code § 1.114(a)):

Is the contribution more than $500?
Did contributions totaling more than $500 come from individuals with the same names and addresses?

2. Contributions from corporations, limited liability companies and limited liability partnerships (C&GC Code § 1.114(b)):

Is the contribution from a corporation, limited liability company or limited liability partnership?
1. Review the contributor’s name, check, letterhead and website, if any, for indicators of the legal form of the business entity.
2. Ask the contributor to complete a contributor card to indicate whether the contributor is a corporation, LLC or LLP.

3. Prohibition on contributions from Contractors doing business with the City (C&GC Code § 1.126 and SFEC Regulations § 1.126-7):

Is the contribution from a person who is negotiating a contract or has recently entered into a contract (of $100,000 or more) within the past twelve months with the City and County of San Francisco, a state agency on whose board an appointee of a City elective officer serves, the San Francisco Unified School District, or the San Francisco Community College District?
A candidate will meet the due diligence requirements related to the prohibition on contributions from contractors doing business with the City if the contributor certifies to the candidate that the following is true: I am not an owner, affiliate, or named sub-contractor of any entity that is currently negotiating a contract with [select appropriate: City and County of San Francisco, name of City department, or the San Francisco Unified School District, the San Francisco Community College District, or board of a state agency that has a member who is appointed by a City elective officer], or any entity that received such a contract within the last twelve months. Due diligence is a mitigating factor in the event that a contribution that violates 1.126(b) is accepted.

4. Prohibition on contributions by persons with pending land use matters (C&GC Code § 1.127 and SFEC Regulations § 1.127-3):

A candidate will meet the due diligence requirements of section 1.127(c) if the contributor certifies in writing, including in electronic format, to the candidate at the time the contribution is made that the following is true:

“I do not have a financial interest in a land use matter, as defined in Campaign and Governmental Conduct Code section 1.127(a) (which excludes my primary residence), that is currently pending before the Board of Appeals, Board of Supervisors, Building Inspection Commission, Commission on Community Investment and Infrastructure, Historic Preservation Commission, Planning Commission, Port Commission, or Treasure Island Development Authority Board of Directors, nor have I had a financial interest in any such land use matter for which any of these boards or commissions has rendered a final decision or ruling within the last twelve months.”

5. Contributions whose true source is not the named contributor (Cal. Gov’t Code §§ 84301 and 84302):

Who is the true source of the contribution?
Did contributions totaling more than $500 come from several individuals with the same employer?

6. Contributions from affiliated entities (C&GC Code § 1.114(c)):

Did contributions totaling more than $500 come from a combination of entities or individuals and entities that have the same or similar names and addresses?
Did contributions totaling more than $500 with similar names or addresses or that were received on the same dates come on checks that were signed by one individual?

7. Contributor information (C&GC Code § 1.114(d); see also Cal. Gov’t Code § 84211(f))

If contributions from a single contributor total $100 or more, do you lack any of the following contributor information:
1. The contributor’s full name.
2. The contributor’s street address (P.O. Boxes are not acceptable).
3. The contributor’s occupation.
4. The name of the contributor’s employer or, if the contributor is self-employed, the name of the contributor’s business. (If the contributor does not have a business name, one of the following may be reported under employer information: “same,” “none,” “self-employed,” or “n/a.”)
Ask contributors to provide the required information on their contribution check or a contributor card.

B. Next Steps

Unless the answer is NO to ALL of the above questions, please contact the contributor to obtain clarification or to return the questionable contribution by taking the following steps:

Send a letter to the contributor to request clarification.
If there is not sufficient time to send a letter, telephone the contributor but keep clear notes regarding the telephone call, including but not limited to: date of call; name and telephone number of person called; name of person with whom you spoke; name and title of person who made the call; and notes reflecting the substance of your conversation.
If there is any doubt that the named contributor is the true source of the contribution, ask the contributor to complete a contributor card attesting that she/he made the contribution from her/his funds and that she/he is not being reimbursed for the contribution.
If you do not receive a response addressing the concerns, return the contribution.

See Example Contributor Card.