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Complaint alleges groups skirting state campaign law

6:28 PM, Oct 19, 2012   |    comments
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State officials are being asked to find out whether two groups outside California are collaborating to exploit a loophole in campaign finance laws to avoid disclosing the donors of some $15 million in political cash.

"There are a lot of legal tools they can use to dig down into this," said Phillip Ung of California Common Cause in the request that the Fair Political Practices Commission (FPPC) clear up the source of the mysterious money.

At issue are two large contributions for efforts to pass Proposition 32, the initiative that would ban campaign spending via deductions from worker paychecks.  The measure would apply to both corporations and unions, but have a more pronounced impact on unions given that's the sole source of their political cash.

In September, an Iowa based group put $4 million into a new effort to pass Prop 32.  This week, an Arizona based group put $11 million into a separate effort to both pass Prop 32 and kill Gov. Jerry Brown's tax increase, Proposition 30.

The allegations are that the two groups may be part of an effort by conservative political forces to avoid California's donor disclosure laws by making one-time contributions only.

In a nutshell, the state regulations say that a 501(c)(4) tax exempt organization -- such as the Iowa and Arizona groups -- do not have to disclose donors for their first contribution to a California campaign, because there's a chance the group's donors didn't expect their money to be used for a California effort.  The state FPPC has thus treated the first donation from these 501(c)(4) groups as a "first bite of the apple," and decided that any subsequent donation would trigger donor disclosure.

The question, then, is whether the Iowa and Arizona based 501 (c)(4) organizations are acting properly -- with donors that didn't know their money was going into a California effort -- or using that exemption to hide donors that would otherwise have to be disclosed.

"Less than three weeks before the election, the very conduct the FPPC rules were aimed at addressing has occurred," says the complaint filed by California Common Cause.  The group wants state regulators to investigate the true source of the contributions before voters go to the polls on November 6.

The $11 million contribution from Phoenix-based Americans for Responsible Leadership is particularly intriguing, as news reports show that donation far exceeds any money the group has ever spent.

The California political action committee that accepted the contribution, the Small Business Action Committee PAC, dismisses the FPPC complaint as a campaign tactic.

"This is a politically motivated charge without one shred of evidence," said spokeswoman Beth Miller.  She points out that California Common Cause is a political opponent of Prop 32.

Miller says her group doesn't know the identity of the donors, but nonetheless acted properly when accepting the contribution for its effort both in support of Prop 32 and against Prop 30.

Governor Brown took aim himself at the contribution at a campaign rally Friday in Burbank.

"California students are being hit by a money bomb tossed at them by a shadowy out-of-state Super PAC," he said, a reference to the education cuts scheduled to go into effect if Prop 30 loses.  "Crossing the Arizona border and spending $11 million of secret money to hurt California students is an extreme act. "

The allegations, whether ultimately proved true or not, do point out the complexity of identifying campaign cash, especially in the current environment of groups that ostensibly are not political action committees -- thus their 501(c)(4) status -- and in the fluid campaign reality put in place by the 2010 U.S. Supreme Court ruling in the Citizens United case, which removed many of the barriers to independent efforts spending whatever they choose.

The labor unions fighting to kill Prop 32 have long wondered how many one-time large donations from out-of-state groups they'd see (though those unions continue to outspend Prop 32 supporters).  The money now on hand likely allows the groups to keep television ads on the statewide airwaves in heavy rotation through Election Day. 


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