L.A. Marathon Firm Fined for Concealing Donations : Ethics: Organization admits laundering campaign contributions while city contract was up for renewal.
The organization that runs the Los Angeles Marathon and one of its former top employees have admitted laundering $73,000 in campaign contributions to local and state elected officials and agreed to pay a $436,000 fine to settle a lengthy investigation, according to documents released Monday.
Marathon President William Burke was not personally cited for money laundering, but he admitted in the legal settlement with city and state officials that his organization concealed the fact that it was the true source of donations to 14 candidates, most of them in the city of Los Angeles.
Most of the illegal donations were made at about the time that marathon officials were coming before the Los Angeles City Council to request an extension of their contract to operate the popular race that they took over in 1985. The council approved the new contract, which expires at the end of 2000.
Burke, a local political fixture who is the husband of Los Angeles County Supervisor Yvonne Brathwaite Burke, acknowledged to the city Ethics Commission and the state Fair Political Practices Commission that he personally signed or authorized that checks be written to an associate, George Beasley. Beasley illegally reimbursed dozens of individuals for making campaign contributions.
In legal stipulations with the two government watchdog agencies, only Beasley admitted improperly reimbursing others for political donations. Nothing in the documents indicated that Burke knew how the money was used.
Burke declined to comment Monday. But in an October, 1992, interview, near the beginning of the investigation, he said he knew nothing about donations from Los Angeles Marathon Inc. being funneled to candidates through others. He said he had placed political fund-raising affairs in Beasley’s hands. “Quite frankly, if I’m guilty of anything . . . I probably did not provide him with the kind of guidance and support I should have,” Burke said.
Beasley also did not return telephone calls, and his lawyer declined comment.
The tentative settlements in the case, released simultaneously in Los Angeles and Sacramento, do not become final unless they are approved next month in hearings before the city Ethics Commission and the state Fair Political Practices Commission.
If approved, the agreements will constitute the most recent victory in a joint investigation by the two agencies into individuals and firms that tried to conceal that they were the true source of massive campaign contributions. The donations were typically funneled through other individuals or companies to disguise their source.
The FPPC and the Ethics Commission last year secured an $895,000 fine from the Evergreen America Corp., a giant shipping firm that admitted it had concealed the source of $172,000 in contributions to state and local officials. The fine was the largest of its kind in a money-laundering probe in California.
In the settlement agreed to earlier this month, the marathon organization admitted that it was the true source of 137 campaign contributions that were given under other names from 1989 through the spring of 1992. The donations went mostly to candidates for Los Angeles City Council in 1991 and 1992, although former Mayor Tom Bradley, who received $4,500, was a major beneficiary.
The largest amount went to Oakland Mayor Elihu Harris, who received 40 contributions totaling $21,000 in 1989 and 1990. State Controller Gray Davis received one laundered marathon contribution of $1,000. Eight Los Angeles City Council members were also among those receiving funds, with Nate Holden receiving $9,000, the largest amount. Several unsuccessful council candidates also received funds.
A spokeswoman for the Oakland mayor said Harris “has no knowledge of this at all and all calls should go to the FPPC.” It was unclear from the settlement papers what connection, if any, Harris might have to the marathon or its organizers.
Holden was out of his office Monday and could not be reached for comment. Davis also could not be reached.
In the past, candidates have said it is difficult for them to know the true source of all campaign contributions or whether those listed as donors have been reimbursed by others.
The Ethics Commission, however, has held seminars in which it urged candidates to aggressively ferret out the true source of campaign donations. The agency in the past has ordered officials to return laundered donations, even if they received them unwittingly, if there is money in their campaign accounts.
The stipulations released Monday described a pattern for most of the illicit donations.
Los Angeles Marathon Inc. representatives Burke, Beasley and Marie Patrick, described as an officer in the company, would sign checks from the marathon over to Beasley, once a top employee at the marathon and later a principal in a firm bearing his name. Marathon employees, their relatives and others would then give donations to political officials and then be reimbursed by Beasley or his firm, according to settlement papers.
The funneling of contributions in this way “undermines the public’s right to know legally required information about the source of political support and contributions and circumvents campaign contribution limits established by the Los Angeles City Charter,” ethics officials concluded.
City Council candidates are permitted to receive $500 donations from each individual or entity per election, while mayoral candidates can receive $1,000. The laundering operation permitted the marathon to pour thousands of dollars more into the campaign accounts of council members and others.
The scheme also allowed the marathon to exceed the amount that an individual or organization can give in a single election. In 1991, the marathon donated $29,500 more than the legal limit in that year’s primary and runoff elections.
The repeated nature of the activity “displays intentional laundering activity, rather than an isolated incident,” according to the settlement signed by Burke, Beasley and their lawyers. They also conceded that the violations took place at a time when the marathon “had matters pending for decision” before the City Council.
The illicit contributions to Los Angeles officeholders and candidates were made from February, 1991, through April, 1992. The City Council approved a contract with marathon officials in the spring of 1991 that extended the marathon’s run through 2000.
Before the council extended the contract, City Councilman Zev Yaroslavsky and others had questioned whether the city was getting the best deal from the marathon. The city controller’s office had found that some payments from the race organization were late and that books were kept so sloppily that it was difficult to track whether the city was receiving its fair share of receipts.
The city’s routine audits of the marathon were eliminated by the City Council during a contract amendment in 1989, although financial reviews are still permitted under some circumstances.
No audit has been completed in the 1990s, said Tim Lynch, a deputy city controller.
While some city officials have questioned whether the city has gotten a fair shake from Los Marathon Inc., Burke is widely credited with turning the marathon from an obscure road race into an internationally known event that attracted 19,000 runners last March and has corporate liaisons with such companies as Mercedes-Benz.
The Los Angeles Ethics Commission begun its investigation of the marathon in the summer of 1992 and soon was joined by the state FPPC.
Both city and state officials declined to elaborate at all on the twin settlements released by their offices. The agreement was reached as the two agencies were enmeshed in a feud that boiled over last week.
An FPPC official accused Ethics Commission Director Ben Bycel of, among other lapses, trying to intimidate lawyers in cases under investigation and of leaking information to the press. The letter from FPPC Director Wayne Ordos also said his agency had done the lion’s share of the work in the money-laundering investigations.
Bycel responded that his agency had gotten the cases started and carried more than half the load from there.
The feud led Ordos to order that his agency no long work with city officials. But officials in both Sacramento and Los Angeles said their work to root out illegal contributions will continue, even if they have to work separately.
Los Angeles Marathon Inc. has admitted improperly concealing the source of campaign contributions to candidates. The private firm enlisted employees, associates and relatives to make contributions to favored candidates and reimbursed the contributors. The recipients may not have known the true source of the funds. LAMI gave $73,000 to the following candidates from 1989 to April, 1992: ELECTED CITY OFFICIALS: AMOUNT * Councilman Nate Holden: $9,000 * Councilman Mark Ridley-Thomas: $5,500 * Mayor Tom Bradley: $4,500 * Councilwoman Ruth Galanter: $4,500 * Councilman Richard Alatorre: $4,000 * Councilman Hal Bernson: $3,500 * Councilman Zev Yaroslavsky: $2,500 * Councilman Joel Wachs: $2,000 * Councilwoman Rita Walters: $1,500 COUNCIL CANDIDATES: AMOUNT * Sharon Mee Yung Lowe: $6,500 * Bob Gay: $5,000 * Brad Pye Jr.: $2,500 OTHER: AMOUNT * Candidates for Non-City Races: $22,000 TOTAL: $51,000