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O''Neill v. Lerner

Decided: November 17, 1977.


Conford, Michels and Pressler. The opinion of the court was delivered by Conford, P.J.A.D.


[154 NJSuper Page 319] This appeal presents the question whether an action lies at the instance of members of a county political party committee to recover on behalf of the committee, against its disbursing and managing officers, funds alleged to have been disbursed by them for purposes other than those to which such expenditures are restricted by N.J.S.A. 19:5-5, and for other relief incidental thereto. The trial judge dismissed the complaint on the essential ground that the sole remedy for the stated grievance was resort to the administrative procedures created by the

New Jersey Campaign Contributions and Expenditures Reporting Act, N.J.S.A. 19:44A-1 et seq. ("campaign reporting act" hereinafter).*fn1 As we are in disagreement with that conclusion, we reverse.

Political party organizations are vital components of the governmental mechanism whereby the democratic processes of election of most public officials, federal, state, county and municipal, are conducted in this State. The organization, maintenance, powers and functions of such organizations are carefully regulated by statute. N.J.S.A. 19:5-1 et seq. Of particular relevance to this appeal is N.J.S.A. 19:5-5, which, until the adoption of the campaign reporting act in 1973, read as follows:

Any state committee, county committee or municipal committee, of any political party may receive and disburse moneys for the general purposes of maintaining such organization during the whole or any part of the year. The expenses for maintenance of organization shall be confined to the hiring of suitable rooms for meetings of such committee, for stationery, for hiring of necessary clerks, for the expenses of notices of the meetings of such committee, for giving publicity to the policies and candidates of their respective party organizations, and other expenses incidental to the maintenance of such organization.

Within twenty days after the day of the general election, the person who has had the custody of the moneys contributed to or on account of any state, county or municipal committee during the previous year shall file with the secretary of state in the case of the state committee, and with the county clerk in the case of the county or municipal committee, a statement of the amount of money received by or on behalf of such committee during the previous year, together with the names and addresses of the persons from whom the money was received, and also a statement of the purposes for which it was expended, itemized as to all items in excess of five dollars, and with a general statement as to the purposes for which the items less than five dollars were expended. The person making

such statement shall make affidavit that the same is true. [Emphasis supplied.]

This provision, which derives from L. 1930, c. 187, ยง 48, has two basic elements. The first paragraph specifies the permissible expenditures of such organizations; the second requires systematic, detailed public reporting of receipts and expenditures. However, N.J.S.A. 19:5-5 was amended by section 27 of the campaign reporting act so as to leave the first paragraph basically intact and to delete the second paragraph. The reporting requirements in the second paragraph were assimilated into the more comprehensive reporting system created by the campaign reporting act. There are no provisions in the campaign reporting act for the recapture for the benefit of a political party committee of any of its funds improperly disbursed for purposes not permitted by N.J.S.A. 19:5-5. The mentioned statute is simply a comprehensive receipts and expenditures reporting act which creates a New Jersey Election Law Enforcement Commission (ELEC) to administer its provisions.

Plaintiffs' verified complaint herein, filed June 2, 1976, asserts in Count II that "certain of the moneys collected [by defendants] which are, or should have become the property of the Essex County Democratic Committee, have been applied or expended for purposes unrelated to the maintenance of the Essex County Democratic Committee, and the conduct of campaigns of the Democratic candidates in the general election." This allegation broadly asserts a violation of N.J.S.A. 19:5-5. From the verified allegations and discovery made before dismissal of the action the following supporting evidence appears.

Defendant Lerner has been chairman of the committee since 1968. Hundreds of thousands of dollars have been collected for or on behalf of the committee since that time, with minimal accounting thereof to the membership. A limited inspection of the committee's financial records by an independent accountant showed "no filing system, no accurate

records, no control system * * *, no budget." The financial record keeping was described as "appalling." Up to February 1, 1974 there were "consistent weekly petty cash withdrawals in amounts generally ranging between $50 and $100." There was no record as to the purposes or uses of such moneys. There was an item, "Christmas" check, drawn in 1975, but no indication of the recipient or purpose. There were frequent purchases of bottles of liquor, signed for by Mr. Lerner, but no indication of their use for party purposes. Thousands of ...

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