Shell Games Hide Sources of Donations

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Times Staff Writer

When Californians vote Nov. 8 after what may turn out to be the costliest initiative battles in state history, they won’t fully know who was behind the campaigns: Politicians and their backers are using holes in state law that help hide the source of donations.

Despite restrictions implemented in California in recent years, political money is being raised and spent with scant public disclosure by the tens of thousands, hundreds of thousands and even millions of dollars.

In this high-priced fight over the eight initiatives on the special election ballot, advocates on all sides can transfer money from one campaign committee to another, use committees that do not have to report their donors right away and route money through nonprofit corporations that are not required to reveal donors’ names at all.


There won’t be full accountings for some campaigns until January, long after the votes are counted. Contributors to others won’t be disclosed until a few days before the election -- after many early voters have cast ballots.

Even experts at tracking political money are stumped this year. Kim Alexander, director of the nonpartisan California Voter Foundation, has spent 15 years following donations in Sacramento. But the volume and the speed with which money is moving from one account to another this year has made the task harder than ever, she said.

“Political players get better and better at playing the money shell game,” said Alexander, whose group provides information about campaign measures, including the largest donors.

Elizabeth Garrett, director of the USC-Caltech Center for the Study of Law and Politics, said that because voters take cues from groups they trust when deciding issues, timely disclosure of donations is crucial.

“If the information is not available at the moment the voter is making her decision,” Garrett said, “then disclosure is irrelevant.”

“Only when you know who is behind an initiative and how much they’re spending can you competently vote,” she said.


In some ways, political donations have never been more transparent in California. Anyone with Internet access can track most of the $200 million-plus being raised in this year’s campaign. (See

But it is still easy to obscure what is being raised and spent.

In March, Gov. Arnold Schwarzenegger disclosed that a Republican committee in Hamilton County, Ohio, gave him $44,535. The California disclosure offers no hint of whose money that was. The Ohio reports are not available online; paper copies are in Cincinnati.

Obtained by mail, the Ohio report shows that Carl H. Lindner, owner of the Cincinnati Reds baseball team and chairman of a national insurance company, was by far the largest single donor to the Republican committee that month, having given $31,750. He has been a major donor to the governor, and his insurance company does business in California.

Another issue is timing. Some funds must report donations daily, others only periodically.

Senate President Pro Tem Don Perata (D-Oakland) and Assembly Speaker Fabian Nunez (D-Los Angeles) are raising money to defeat Proposition 77, which would strip legislators of the power to draw district boundaries and give it to retired judges.

Using funds controlled by Senate and Assembly Democrats, Perata and Nunez in recent weeks transferred $2.25 million to the No on 77 effort.

Under the rules governing the lawmakers’ funds, donations made since June 30 won’t be revealed until the end of October. And money they raise between Oct. 23 and election day won’t be disclosed until the end of January.


Schwarzenegger is disclosing his donors on a daily basis even though the law does not require it, his campaign attorneys say.

He “wanted to set a good example ... and shine daylight into how we operate,” said spokesman Rob Stutzman.

Not all of the governor’s allies are following that example.

Early in the year, Schwarzenegger and Democratic legislators were negotiating to avert the special election, while a petition drive commenced to place Proposition 75 on the ballot. The highly charged initiative could weaken the sway of public employees unions by restricting their ability to raise money for political campaigns.

The Small Business Political Action Committee paid for much of the drive. But the source of its funds was not clear until its periodic filing Aug. 1, about six weeks after Schwarzenegger ordered the election.

The Aug. 1 report showed the Small Business PAC spent $640,000 to qualify Proposition 75 for the ballot. The group’s donors were also among the governor’s biggest donors, including California Business Properties Assn., which gave $200,000, and New Majority Political Action Committee, at $150,000.

Separate filings made Aug. 1 showed that mortgage lender Ameriquest Capital Corp. was a donor to all three committees, giving a combined $710,000 in the first half of 2005.


Ameriquest is one of Schwarzenegger’s biggest donors, having given his campaigns $1.58 million since 2003. Ameriquest has taken no position on Proposition 75 or Proposition 77.

“We didn’t do anything nefariously. We reported when we were required to,” said Joel Fox, who heads the Small Business PAC and is a Schwarzenegger ally.

Campaign reports provide more than names of donors and the amounts they give. They also detail how campaigns spend their money, showing payments to television stations for advertising air time, how much consultants are paid and even amounts spent at restaurants and hotels.

This year, organized labor has added a twist -- reporting what could be considered campaign expenses as lobbying costs.

The California Teachers Assn., Schwarzenegger’s most well-heeled foe, has filed campaign finance reports showing it spent $48 million against the governor’s initiatives. But in separate filings on lobbying expenditures, the teachers union has reported that an additional $8.2 million went to “influence.” The reports provide no other detail.

Teachers union spokeswoman Becky Zoglman said much of the money was spent on a TV ad campaign attacking Schwarzenegger’s handling of schools. The $8.2-million attack is credited with eroding the governor’s popularity.


Another blind spot involves nonprofit corporations. By law, they can withhold their donors’ identities.

One of California politics’ most active nonprofits is the Foundation for Consumer and Taxpayer Rights of Santa Monica. Since Schwarzenegger’s election in 2003, the foundation has created a website, ArnoldWatch, and regularly sends e-mails to political insiders decrying what it perceives as conflicts between the governor’s publicly disclosed donations and his official actions.

The foundation estimates it has spent $150,000 on ArnoldWatch but declines to release the identities of its donors.

Foundation President Jamie Court likened his group’s need to hide the identities of its donors to the NAACP’s effort to shield its contributors decades ago during its fight for civil rights.

“We don’t want our donors to be harassed because of the stands we take, so we maintain their privacy like every other not-for-profit charity,” Court said.

In some instances, nonprofits get directly involved in campaigns by donating money.

One such donor this year is American Family Voices, based in Washington, D.C., and founded by former Clinton White House aide Mike Lux.


American Family has taken a skeptical view of the Iraq war, supported plaintiffs in medical malpractice cases and called for an independent counsel investigation of Rep. Tom DeLay (R-Texas).

In California, American Family gave $375,000 to a group backed by Democratic congressional members to oppose Proposition 77.

And despite its liberal leanings, American Family gave an additional $125,000 to a No on 77 committee headed by David Horowitz, a neoconservative author who hopes to persuade Republicans to oppose 77. Lux described his donors as “liberal” but would not name them.

“We don’t want our membership disclosed,” said Lux, “in part because when we have disclosed members, right-wing groups harass them.”

The $125,000 is by far the largest donation to Horowitz’s effort, though Horowitz says he leaves fundraising to consultants.

“I don’t know who is funding me, but I don’t really care,” Horowitz said. “Nobody controls me.”


Secretary of State Bruce McPherson, whose office oversees campaign matters including disclosure, said requirements have become “outdated.”



Voting deadline

* Monday is the last day to register to vote in the Nov. 8 state and local elections.

* If you have changed your address, name or political party since the last election, you must re-register.

* The Los Angeles County registrar can be reached by phone at (800) 815-2666 or on the web at

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