GOP Hid Insurance Firm Donations in Tight Races

With only days left before the November election, state Republicans solicited nearly $1 million from a Los Angeles insurance company and channeled it to key races around California in a way that hid the source of the contributions.

On Oct. 21, Woodland Hills-based 21st Century Insurance Group wrote checks ranging from $25,000 to $200,000 to the California Republican Party and GOP committees in 15 mostly rural counties.

The money was given one business day after the deadline for public disclosure and moved around the state in circuitous routes that circumvented campaign contribution limits.

The county committees made substantial donations to one or more of six Republican legislative candidates, all of whom were in tight races they subsequently won. Most of the committees gave money to candidates in districts outside their counties.

Some committee chairmen said they were even unaware that donations had been made in their names.

“It comes as news to me that money was funneled through my county,” said San Joaquin County GOP Chairman Rick Veldstra, adding that he was “speechless” to learn that $23,500 went to help a candidate about 450 miles away. “We’re not used to dealing with numbers like this.”

The money enabled the candidates, most running neck and neck in the polls, to pay for last-minute phone banks, mass mailings and television advertisements. All six won in November, giving Republicans two additional seats in the Assembly and one in the Senate -- their first gain since 1994 -- and preventing Democrats from winning the two-thirds majority that would have allowed them to pass budget bills without Republican support.

Had 21st Century made its donations only one business day earlier, the contributions would have been publicly disclosed under the business’ name before election day. Instead, the insurance company did not have to report its contributions until Jan. 31.

The company, still smarting from Democratic legislation two years earlier that cost the insurance giant more than $50 million in Northridge earthquake claims, said its goal had been to help Republicans, and it relied on the party to recommend when and where to place its money. “The CRP [California Republican Party] said, ‘Would you please give political funding here,’ ” said company spokeswoman Fiona Hutton.

The strategy for Republicans, said a party spokesman, was to keep the last-minute infusion of $950,000 secret from the Democrats, who would have fought back by putting more money into their legislative candidates.

“In the heat of an election, you don’t provide any more information to your opponent than is required by law,” said spokesman Rob Stutzman. “To the extent that you can go stealth, you’re going to do that. We did it and the Democrats didn’t, and they’ve got sour grapes about it.”

Typical of how the strategy played was the race for the 12th Senate District in the Central Valley. Democrat Rusty Areias, a former head of the state parks agency, was in a tight battle with Republican Jeff Denham, a 35-year-old agricultural businessman in Salinas.

The district does not include Kern County. But days before the election, the Kern County GOP made six contributions totaling $67,000 to Denham. The San Joaquin County committee, also outside the district, kicked in $12,500. Two other county committees that are in the district -- Merced and Monterey -- gave $2,500 and $46,167.

“If we had been able to identify the money ... it certainly would have been an issue,” Areias said. “The public had the right to know the insurance industry was putting that kind of money behind a candidate.” Areias lost by 1,843 votes out of more than 152,000 cast, the tightest Senate race last fall.

Denham declined to comment.

Kern County Republicans also gave generously to two other Republican campaigns outside their borders, donating $38,000 to Shirley Horton, now an assemblywoman from Chula Vista, and $30,984 to Guy Houston, her colleague from Livermore.

While they were helping those Republicans singled out by the state party, the Kern County GOP spent just $1,000 in the campaign’s closing days on its own Assembly candidate, Dean Gardner, a general contractor and manufacturer of custom gun stocks in Bakersfield. He lost by 266 votes.

“We knew we were in a really close race,” said Gardner, who was unaware that the committee had sent so much money out of the district.

Kern County’s GOP chairman referred questions to a Republican consultant who did not return calls.

Other winning Republicans who benefited from 21st Century contributions were Assembly members Bonnie Garcia of Cathedral City, Greg Aghazarian of Stockton and Alan Nakanishi of Lodi.

The contribution technique went around campaign finance law in several ways: If 21st Century had given directly to any candidate, it could only have given $3,000, and the candidate would have had to report the contribution within 24 hours. And, if it had given to merely one party committee, only $25,000 could have been spent on behalf of all legislative candidates combined.

21st Century said through its lobbyist and spokesperson that the decision to make the GOP contributions grew out of frustration over what it believed was a hostile business environment in the Democratic-controlled Legislature.

Personal Insurance Federation President Dan C. Dunmoyer said the “straw that broke the camel’s back” was the passage of a bill by Senate President Pro Tem John Burton (D-San Francisco), SB 1899, giving Los Angeles-area homeowners another year to make claims for damage from the 1994 Northridge earthquake.

The bill, signed into law by Gov. Gray Davis, followed a legislative investigation in 2000, which revealed that then-Insurance Commissioner Chuck Quackenbush had allowed 21st Century (then called 20th Century) and other companies to escape major penalties although his department had found evidence that they mishandled Northridge earthquake claims. Quackenbush required 21st Century to pay a $100,000 fine and donate to a nonprofit foundation $6 million, some of which was later used for television commercials featuring the commissioner. Quackenbush resigned in June 2000 to avoid impeachment.

Darry Sragow, the chief political strategist for Assembly Democratic campaigns, said the heavy financial involvement of a controversial insurance company would have been fodder for Democratic campaign literature.

“They [Republicans] knew perfectly well if we’d seen this amount of money going into an Assembly campaign from 21st Century, we would have had a piece of mail against them before election day,” he said.

Burton said, “They were trying to hide it.”

Assembly Speaker Herb Wesson (D-Culver City) said he believed the huge infusion of cash from 21st Century had “really made a difference in a couple of races.”

Before passage of Proposition 34 in 2000, California had no contribution limits but did require periodic disclosure of political giving and expenditures. The ballot measure, written by Burton and supported by both major political parties, went into effect Jan. 1, 2001. Last November was the first time it governed campaign financing in a general election.

The new law put a $3,000 limit on direct contributions to legislative candidates but imposed no limit for contributions from political parties. Donors giving to political parties, however, cannot earmark more than $25,000 “for the purpose of making contributions for the support or defeat of candidates for state office.” The donors’ money otherwise can go to general party expenses such as get-out-the-vote drives.

Robert Stern, co-director of the Center for Governmental Studies and coauthor of the law establishing California’s Fair Political Practices Commission, said Republicans were clearly taking advantage of gaps in both disclosure requirements and contributions limitations.

“It’s a blatant attempt by the Republicans to prevent their candidates from being tinged by contributions from an insurance company,” he said.

Tony Miller, a former acting secretary of state who examined the campaign reports of the Republican committees for The Times, said the contributions from 21st Century did not appear to violate any laws, but the actions of at least one county committee should be scrutinized by the state’s campaign finance watchdog, the Fair Political Practices Commission. He said the Kern County Republican Central Committee may have exceeded Proposition 34 contribution caps that say committees can only distribute $25,000 from a single donor to candidates. Kern County party officials declined to comment.

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Contributions

21st Century Insurance Group secretly contributed $950,000 to the California Republican Party and 15 county committees just before last November’s general election. The money helped cement legislative victories.

*--* 21st Century Contributions By amount California Republican Party $200,000 Kern County Republican Central Committee 150,000 San Diego County Republican Central Committee 100,000 California Republican Victory Fund/San Joaquin 50,000 Monterey County Republican Central Committee 50,000 Orange County Republican Central Committee 50,000 San Bernardino County Republican Committee 50,000 Ventura County Republican Central Committee 50,000 Republican Party of Sacramento County 45,000 Butte County Republican Central Committee 40,000 Merced County Republican Central Committee 40,000 Fresno County Republican Central Committee 25,000 Placer County Republican Central Committee 25,000 Republican Central Committee of Imperial County 25,000 Riverside County Republican Central Committee 25,000 Yuba County Republican Central Committee 25,000 Total $950,000 Source: California Secretary of State

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The donation trail:

In the days leading up to the November elections, 21st Century Insurance Group quietly gave almost $1 million to Republican Party coffers.

Saturday, Oct. 19: Deadline for public disclosure of contributions before election time.

Oct. 21: 21st Century Insurance gives $950,000 to state GOP and 15 county committees.

GOP groups give money to six candidates in tight races.

Nov. 5: Election day. All six candidates win.

Jan. 31: 21st Century Insurance reports contributions,

meeting state deadline.

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Source: Times Research