What Limits? New Law Can’t Stop Big Money

In November 2000, voters passed a measure billed as a way to clamp a lid on campaign contributions and close loopholes that helped the wealthy.

But in the recall election, the first statewide test of Proposition 34, six- and seven-figure checks are flying.

On Tuesday, a California Indian tribe announced its intention to pump $2 million into Lt. Gov. Cruz Bustamante’s campaign to replace Gov. Gray Davis if the recall passes Oct. 7. The statement followed more than $800,000 in gifts last week from two other tribes. And Bustamante’s campaign aides say he intends to spend the money and is entitled to under the current rules.

Although Bustamante’s action is likely to be challenged, it illustrates the ways in which the new system is not as sweeping as it sounded when first proposed.

Proposition 34 was promoted as a reform, but as administered it contains provisions that still allow for big money to flow into campaigns:

* Under one that favors incumbents, officeholders can receive donations of unlimited size in campaign accounts established before the initiative’s limits took effect. They can use that money for a variety of political ends. Roughly half of all state legislators, and almost all statewide officeholders, including Bustamante, have old accounts that remain active.

The Viejas Band of Kumeyaay Indians, which has major gambling interests in San Diego County, will give $21,200 -- the maximum that Proposition 34 allows to be donated directly to a candidate -- to Bustamante’s campaign for governor.

But $1.5 million of its gift will go to a committee he formed to support his campaign for reelection last year to the lieutenant governorship. Bustamante’s campaign officials say he will spend the $1.5 million on his run for the governor’s office.

“Everything we are doing is legal,” Viejas Vice Chairman Bobby L. Barrett said at a news conference Tuesday. “We are very proud of the contribution we are giving him.”

* Under U.S. Supreme Court rulings, donors can give unlimited sums to independent committees established to support or oppose candidates. The donors are not supposed to coordinate their efforts with the candidates. However, state rules governing these so-called independent expenditures are looser than rules in many other jurisdictions.

The Viejas will spend $479,800 on an independent campaign for Bustamante. The tribe’s political consultant, Richie Ross, doubles as the main strategist for Bustamante’s gubernatorial campaign.

* Proposition 34 specifically exempts targets of recalls from contribution limits. Davis, who raised more than $70 million during his first term, can accept donations of unlimited size to his gubernatorial campaign account. He has tapped 20 donors for six-figure donations, including four contributors who have given $200,000 and more.

There are no limits on how much of their own money candidates can spend on their campaigns. Republican Arnold Schwarzenegger has given his campaign $2 million, and Peter V. Ueberroth, another millionaire Republican running for governor, has given his $1 million.

* Committees established to support or oppose the recall --there are 16 of them -- are considered the same as committees that support or oppose ballot measures. Under a 1976 Supreme Court ruling, such committees can accept unlimited donations of any size.

* While Proposition 34 imposed strict campaign disclosure requirements, campaigns have found ways of avoiding the sunshine provisions. Nonprofit corporations can, for example, amass large sums from individuals and corporations and pass that money on to campaigns, never having to disclose donors’ identities. And as the election draws near, some of the largest contributions can easily be hidden from the public, with some donors pouring cash into committees that can raise, and spend, unlimited sums for or against candidates.

Legislators placed Proposition 34 on the ballot in November 2000, fearing that federal courts would uphold the much stricter campaign finance limits of Proposition 208, passed in 1996.

“California is still the Wild West when it comes to campaign fund-raising,” said the ballot argument signed by Dan Stanford, chairman under Gov. George Deukmejian of the Fair Political Practices Commission, the state watchdog agency that monitors campaign fund-raising and spending. “Six-figure campaign contributions are routine. Proposition 34 finally sets enforceable limits and puts voters back in charge of California’s political process.”

While Proposition 34 was advertised as a way to tame California’s campaign finance system, the attempt to corral spending quickly developed holes, in part because of interpretations by the FPPC.

In 2001, the FPPC interpreted Proposition 34 to say that restrictions do not apply to political committees created by legislators before the measure took effect Jan. 1, 2001. A bill to impose caps on such funds stalled in the state Senate this year.

Legislative leaders quickly used that interpretation to gather contributions for their old committees that were many times greater than the $3,000 limit on donations to legislators. The ruling said that although incumbents could use those donations for a variety of political purposes, the money could not be spent directly on new election campaigns.

Bustamante, by contrast, believes that FPPC decisions, including one not to limit transfers to new committees, provide him with a way around the law’s limits.

He has accepted six-figure donations from gambling tribes and labor unions to his old committee and intends to transfer as much as $4 million into his current gubernatorial campaign coffers, according to Ross.

The FPPC said Bustamante has not requested its advice about the legality of such a move, although the commission issued a statement last week suggesting that such transfers may not be permitted. But Ross and Bustamante attorney Lance Olson, who represents the state Democratic Party and helped write Proposition 34, are confident that their interpretation is correct.

“The bottom line,” said Olson, “is that the FPPC adopted rules which permit the receipt and transfer of these funds. We’re playing by those rules. Now that they see how those rules play out, they may be having some second thoughts.”

Under Bustamante’s theory, he can accept unlimited donations to the old committee, and “attribute” up to $21,200 to each donor to that old committee. In a complex series of steps, Bustamante is accepting large new donations to his old committee, then transferring that money into his new one.

State Sen. Tom McClintock (R-Thousand Oaks), a veteran lawmaker who has a variety of old committees, could use the same gambit. But on Tuesday, he rejected the idea, saying “voters were very clear in their intentions” when they approved Proposition 34.

“It’s cheating,” McClintock said. “I think voters should be outraged that Bustamante has thumbed his nose at the public.”

Proposition 34 did more than cap contributions. It contained disclosure requirements. Donations of $1,000 or more must be reported within 24 hours on the secretary of state’s Web site, according to the measure itself and legislation pushed later by the proposition’s main author, Senate President Pro Tem John Burton (D-San Francisco), which expanded the provisions.

But that disclosure requirement -- among the nation’s strongest -- can be evaded.

In last year’s statewide election, 21st Century Insurance of Woodland Hills donated nearly $1 million to several local Republican committees, which in turn sent five-figure checks to Republicans running for Assembly and state Senate seats. Because of a quirk in the law that allowed late contributions to be hidden for months, the source of the donations did not become known until after January. Burton has introduced legislation to close that loophole.

The disclosure requirements also do not extend to nonprofit corporations that get involved in campaigns.

California Common Cause is preparing to sue the American Civil Rights Coalition, a nonprofit corporation headed by Ward Connerly.

Connerly is promoting Proposition 54 on the Oct. 7 ballot to limit government’s ability to gather racial and ethnic information. The coalition has given $1.5 million to back Proposition 54. But federal law allows the identities of donors to be kept confidential.

Another nonprofit organization, Americans for Limited Terms, spent $1.03 million last year to defeat a ballot proposition to ease legislative term limits. But donors to that group remain secret.

Proposition 34’s limits on legislative races took effect in 2002. A Times analysis shows that direct donations to legislative candidates and spending by them in the primary and general elections that year was $76.5 million, down from the roughly $100 million spent on legislative races on the two most recent campaigns.

However, direct spending was only part of the cost of the last year’s legislative campaigns. Democratic and Republican party spending rose sharply as rules imposed by the initiatives shifted donations to the parties.

In addition, groups ranging from lawyers and dentists to public employee unions, Indian tribes and mobile home owners spent millions more in independent campaigns for and against candidates.

In many instances, the independent spending came in forms that were hard to track. The California Correctional Peace Officers Assn., allied with some Indian tribes that own casinos, spent more than $200,000 on behalf of Libertarian candidate David Eaton. The spending was aimed at peeling votes away from the victor, Sen. Jeff Denham (R-Salinas), and helping the Democrat.

In the recall campaign, several groups besides the Viejas Indians will be mounting independent campaigns. One such group already has weighed in.

The California Voter Project has made an initial expenditure of $4,357 for radio spots and a Web site targeting Schwarzenegger. Among the donors to the group are the California Teachers Assn., the main union representing teachers; trial attorneys who file personal injury lawsuits; and an array of businesses including two San Francisco strip clubs.

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Contributions race

These contributions were reported by major candidates on the recall ballot who have received sums of at least $100,000 for their gubernatorial campaigns. Totals are for all contributions through Aug. 23 and contributions of $1,000 or more through Tuesday. Donations of $1,000 or more must be reported within 24 hours of receipt. Candidates may, but are not required to, file reports on weekends.

*--* Contributions Candidate or committee Total reported Reported since Friday Cruz Bustamante $900,792 $236,500 155 contributions 28 contributions

*--*

* Edward M. Kashian, a Fresno real estate developer, contributed $21,200* and the Kashian Group, one of his companies, also gave $21,200. Moving America Forward, a political committee controlled by New Mexico Gov. Bill Richardson, added $21,200. Jerome Falic and Simon Falic of Glen Burnie, Md., executives of the Duty Free Americas chain of shops, gave $12,500 each.

*--* Arianna Huffington $440,896 $30,700 2,254 contributions 5 contributions

*--*

* Harvey Weinstein, co-chairman of Miramax Films, gave $21,200.

*--* Tom McClintock $610,272 $44,500 1,152 contributions 15 contributions

*--*

* Mercury General Corp., a Los Angeles insurance company, gave $10,000. The political action committee for the Asphalt Pavement Assn. contributed $9,000, while the California Commercial Asphalt Corp. gave $2,500.

*--* Arnold Schwarzenegger $3,718,718 424 $234,900 41 contributions contributions

*--*

* Seven individuals or groups have contributed $21,200 since Friday, including Richard S. Allen, CEO of the Allen Group, a developer of industrial and office buildings; Dwight Decker, CEO of Conexant Systems, a semiconductor technology company; Kathryn K. Moore, CEO of Santa Ana-based Corinthian Colleges, operator of online and vocational training schools; and a campaign committee for Dean Andal, a Republican who lost the 2002 primary for California controller.

*--* Peter V. Ueberroth $2,838,923 229 $209,938 37 contributions contributions

*--*

* Ron Maggard, president of a Riverside company that owns 20 Long John Silver seafood restaurants, contributed $21,200; Chris Sullivan, a Pebble Beach manager at Outback Steakhouse Inc., gave $20,000; Donald P. Kennedy, chairman of First American Corp. -- one of the nation’s largest title insurance companies -- gave $17,500.

*

Two anti-recall committees, which are not subject to the same contribution limits as candidates, have raised more than $5 million to help Gov. Gray Davis.

Taxpayers Against the Governor’s Recall has reported receiving more than $2.4 million from 175 contributions. Californians Against the Costly Recall of the Governor has reported raising more than $2.7 million, with $121,000 from seven contributions reported since Friday.

*

The political action committee for the American Federation of State, County and Municipal Workers gave $50,000 to Californians Against the Costly Recall, while Californians Against the Costly Recall transferred $100,000 of its funds to Taxpayers Against the Governor’s Recall.

*Contributions to candidates from each outside source are limited to $21,200. There is no cap on the amount candidates can give their own campaigns.

Reported by Times staff writer Joel Rubin and Times researcher Maloy Moore.

Source: Campaign reports filed with the California secretary of state.

Los Angeles Times