BEFORE THE PUBLIC DISCLOSURE COMMISSION OF THE STATE OF WASHINGTON In the Matter of Enforcement Action Case No. 66161 Against: Joshua Freed STIPULATION AS TO FACTS, Respondent. VIOLATIONS AND PENALTY The parties to this Stipulation, namely, the Public Disclosure Commission Staff, through its Executive Director, Peter Lavallee, and Respondent Joshua Freed, a 2020 candidate for Governor of Washington State through Mark Lamb, legal counsel for the Respondent, submit this Stipulation as to Facts, Violations and Penalty in this matter. The parties agree that the Commission has the authority to accept, reject or modify the terms of this Stipulation. The parties further agree that in the event the Commission suggests modi?cation to any term of this agreement, each party reserves the right to accept or reject that modi?cation. In the event either party rejects a modi?cation, this matter will proceed to hearing before the Commission. JURISDICTION The Public Disclosure Commission has jurisdiction over this proceeding pursuant to RCW 42.17A, the state campaign ?nance and disclosure laws; RCW 34.05, the Administrative Procedure Act; and WAC 390. FACTS 1. On August 8, 2019, Joshua Freed registered with the PDC declaring his candidacy for Of?ce of Governor, establishing the Joshua Freed for Governor committee (Campaign) for the 2020 election, selecting the Full Reporting Option and listed party preference as Republican. 2. Mr. Freed has previously ?led with the PDC as a 2005 candidate for Bothell City Council in which he was elected to that of?ce in 2005, and re-elected in 2009, and 2013, serving on ?le Council as either a City Councilmember or as Mayor until 2017. STIPULATION AS TO 1 FACTS. VIOLATIONS AND PENALTY PDC CASE 66 3. On October 10, 2019, the Campaign ?led a Monetary Contributions report (03 report) disclosing that a $500,000 candidate loan had been received from Joshua Freed using his personal funds on September 14, 2019. The $500,000 candidate loan was disclosed on line lc of the C-3 report as having been received and deposited on September 14, 2019. Although requested by staff, no loan document was ever produced by the Campaign. 4. The Campaign also ?led a completed Schedule Loan Document (Schedule L) that was attached to the 03 report submitted on October 10, 2019, as required for a candidate using personal funds to make a loan to the candidate's own authorized committee. The Schedule disclosed that the Campaign received a $500,000 loan from Joshua Freed on September 14, 2019, which was designated as a candidate loan for the 2020 primary election by checking the primary box and listing a zero percent annual interest rate was being charged. 5. On February 10, 2020, the Campaign ?led the January 2020 Summary Full Campaign Contributions and Expenditures report (04 report) disclosing $95,201 in monetary contributions received, plus $661.84 for in-kind contributions received, and $521,765.47 in total expenditures had been made during the period. 6. The (3-4 report ?led by the Campaign disclosed that a $500,000 expenditure was made to Joshua Freed on January 31, 2020 and listed the Schedule A description for the expenditure as "Loan Received" from Mr. Freed on September 14, 2019. The January 2020 C-4 report included a completed Schedule L, Section 2 of the form for Loan Payments and disclosed a $500,000 expenditure was made to Joshua Freed on January 31, 2020 as loan repayment. 7. On June 30, 2020, the Campaign ?led an amended C-3 report for the information that had been previously disclosed on the October 10, 2019 O3 report, retroactively reclassifying the previously disclosed $500,000 candidate loan from Joshua Freed as a $500,000 monetary contribution received from the candidate's personal funds. The amended C-3 report disclosed the $500,000 contribution from Mr. Freed using personal funds on line 1b of the report and removed any referenced to the Schedule loan document. 8. In June of 2020, the Campaign also ?led three amended C-4 reports for the January 2020 timeframe, and two of the amendments listed the expenditure description as an expenditure made to Joshua Freed for repayment of the ?Loan Received." The third and ?nal amended STIPULATION AS TO 2 FACTS, VIOLATIONS AND PENALTY PDC CASE 66161 l0. ll. 12. In reviewing the appropriateness of the civil penalty, Commission Staff reviewed the criteria in WAC 390-37-182. The mitigating factors in this matter include that: l. C-4 mport for January of 2020 was filed by the Campaign on June 30, 2020 and amended the $500,000 expenditure description to state "Refund of Contribution". On July 21. 2020, the Campaign filed an additional amended January 2020 C-4, removing the $500,000 expenditure made to Mr. Freed and instead disclosed that a $450,000 expenditure had been made by the Campaign on January 2020 to Joshua Freed, and again listing the description as a "Refund of Contribution." PDC Sta?? repeatedly requested that the Campaign provide copies of the Campaign's bank statements to verify the nature of the transactions described above. On July 21, 2020, the Campaign provided copies of heavily redacted bank statements in response to sta?'s request for that information. On August 12, 2020, following the issuance of a Notice of Administrative Charges in this matter, unredacted bank statements were provided by the Campaign. The copies of the Campaign?s bank statements listed a "Telephone Transfer Credit" of $500,000 into the Freed for Governor account as having been received on September 6, 2019. eight days earlier than the September 14, 2019 date disclosed on the initial 03 report ?led with the PDC by the Campaign. In addition, the copies of the bank statements listed that a "Telephone Transfer Debit" in the amount of $450,000 had been transferred out of the Freed for Governor bank account on December 31, 2019, thirty-one days earlier than the expenditure that had been made to Mr. Freed was disclosed to the PDC. PENALTY FACTORS The Respondent's Campaign timely ?led C-3 and C-4 reports for the 2020 election cycle. 2. The Respondent has not previously been found to have violated RCW 42.17A or WAC 390. 'i I STLPULATION AS TO 3 FACTS. VIOLATIONS AND PENALTY PDC CASE 6616l vati ac rsin is ma eri clude that: The pilblic was deprived of signi?cant Campaign ?nance information for a good portion of the 2020 Primary Election cycle concerning the loans and/or contributions made by Mr. Freed to his Campaign. At the time made, the loans and/or contribution made by Mr. Freed to his campaign made up the majority of the campaign?s funds. The Campaign was for the highest statewide elected of?ce in Washington State and had a professional organization with experienced staff administering it. The Campaign has the resources available to comply with the reporting requirements for its Committee in accordance with RCW 42.17A and WAC 390. STATUTORY AND RULE AUTHORITY RCW 42.17A.l45 requires every report and statement required under RCW 42.17A shall identify the person preparing it, and shall be certi?ed as complete and correct, both by the person preparing it and by the person on whose behalf it is ?led. RCW 42.17A.23S provides that a treasurer or candidate shall preserve books of account, bills, receipts, and all other ?nancial records of the campaign or political committee for not less than ?ve calendar years following the year during which the transaction occurred, with (9) requiring all reports ?led pursuant to subsection (1) or (2) be certi?ed as correct by the candidate and the treasurer. RCW 42.17A.240 require candidates under the Full Reporting Option to ?le timely. accurate C-3 and C-4 reports disclosing contribution and expenditure activities undertaken by the committee. Under the full reporting Option, until ?ve months before the general election, C-4 reports are required when contributions or expenditures exceed $200 since the last report. Beginning June for every participant in an election, C-4 reports are required 21 and 7 days before each election, and a post-election 04 report in which the committee receives contributions or makes expenditures, and in the month following the election. RCW 42.17A.445 states repayment of loans made by the individual to political committees shall be reported pursuant to RCW 42.17A.240. However, contributions may not be used to x?nmf?? AS TO 4 FACTS, VIOLATIONS AND PENALTY PDC CASE 66161 f? reimburse a candidate for loans totaling more than dollar amounts adjusted for inflation by rule of the commission adopted under the authority of RCW 42.17A.125. Current dollar amounts are listed in WAC 390-05-400. WAC 390-] 6-2260) provides that only loans which are recorded in a written loan agreement executed at the time of the loan and properly reported may be repaid to a candidate. The rule also states the amount of campaign contributions which may be used to repay a loan made by the candidate to the candidate's own political committee or campaign, is limited to the loan repayment limit in RCW as adjusted by WAC 390-05-400. For purposes of the loan repayment limit, these loans are aggregated for each primary, general, special or recall election and must be designated accordingly by the candidate at the time the loan is made. WAC 390-05400 allows, pursuant to the authority in RCW 42. 7A. 25, the commission to revise the monetary contribution limits and reporting thresholds and code values of the act to re?ect changes in economic conditions. The current (2020) reimbursement of candidate for loan to own campaign is $6,000. PDC Interpretation No. 14-01 states that a candidate may not receive loan repayments that exceed the limitations allowed by RCW VIOLATIONS Based on the Stipulation of Facts set forth above, the Respondent stipulates to having violated: l. RCW 42.17A.235 and .240 by failing to timely and accurately ?le Summary Campaign Contribution and Expenditure Reports (C-4 reports) and Monetary Contributions Reports (C- 3 reports) disclosing the acceptance and repayment of the contribution/loan by the Campaign. 2. RCW 42.17A.445, by exceeding the $6,000 per election candidate loan repayment limits when his Campaign repaid Respondent Freed at least $450,000 of a $500,000 candidate loan he made to the campaign?ling reports concerning the contribution/loan that were not correct as was certi?ed. AS TO 5 FACTS, VIOLATIONS AND PENALTY PDC CASE 6616! WAC 39046-2260), by failing to record the loan in a written loan agreement executed at the time of the loan. PENALTY Based upon the Stipulation of Facts and Violations set forth above, the Respondent agrees to pay a total civil penalty of $50,000 with $25,000 suspended, on the following conditions: a. The Respondent is not found to have committed any further violations of RCW 42.17A or WAC 390 within four years of the date of the ?nal order in this matter. The suspended penalty shall not be assessed based solely upon any remediablc violation, minor violation, or error classi?ed by the Commission as appropriate t0 address by a technical correction. b. The Respondent is in compliance with all reporting requirements. c. The non-suspended portion of the penalty ($25,000) is paid by the Respondent within 60 days of the date of the ?nal order in this matter. If the Respondent fails to make timely payment of the non-suspended portion of the penalty, the $25,000 suspended portion of the penalty shall immediately become due without further action by the Commission. The Respondent af?rrns his intention to comply in good faith with the provisions of RCW 42.17A and WAC 390?in the future. may? 912mm Peterjx?vallee, Executive Director Date Signed Public Disclosure Commission 2 1 20 Mark Lamb, Counsel for Date Signed Joshua Freed, Respondent STLPULATION AS TO 6 FACTS, VIOLATIONS AND PENALTY PDC CASE 66l6l