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California

L.A. to curb developer donations, but some fear corporate contributions could mask source of giving

City Councilman Mitch O’Farrell speaks before the council, addressing Councilman David Ryu, ahead of a vote to restrict campaign contributions from real estate developers.
City Councilman Mitch O’Farrell, left, speaks before the council, addressing Councilman David Ryu, center, ahead of a vote to restrict campaign contributions from real estate developers.
(Jason Armond/Los Angeles Times)

Real estate developers pushing to get new projects approved at Los Angeles City Hall will be banned, under a new law, from giving campaign contributions to the council members vetting their projects.

But Los Angeles leaders have held off on another change that critics say is needed: Barring donors from giving through limited liability companies and other business entities that can make it difficult to tell who is donating.

Doing so, they argue, would prevent prohibited donors from using LLCs to camouflage their campaign contributions. Banned donors are not legally permitted to give through such entities, but it could be tougher for the city and watchdogs to detect them.

Los Angeles allows political donors to give not only as individuals, but also through companies and other groups. But some corporate entities don’t have to publicly reveal who owns them, leaving it unclear to the public who is giving the money. In some cases, donors have funneled money through such companies to evade restrictions on campaign contributions.

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Members of the Ethics Commission have repeatedly raised the issue amid concerns about donor transparency. In February, the commission recommended barring donations from groups, allowing people to give only as individuals.

If the city doesn’t adopt a “people only” system, real estate developers could violate the new restrictions without being easily detected, by continuing to give through LLCs, argued Sean McMorris, who heads the local chapter of Represent.Us, which focuses on combating corruption. “It’s obscuring the source of the money.”

Ethics Commission staffers argued that allowing people to give only as individuals would also prevent moneyed donors from using companies to sidestep city limits on how much they can give — a problem that has arisen hundreds of times in city audits and probes. Some donors have given the maximum both in their own names and that of an LLC they control.

Two and a half years ago, real estate investor Leeor Maciborski was fined $17,000 for exceeding city limits on political donations after he wrote checks through more than a dozen LLCs linked to apartment buildings in East Hollywood and Los Feliz. The Times had highlighted the donations nearly two years earlier as an example of the murkiness of LLC money.

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“The public needs to see who is actually making a contribution — that’s the bottom line,” said Wayne Williams, a board member with the California Clean Money Campaign, which backed the proposed ban on such donations.

But some council members balked at the idea of totally barring donations from groups when it was last discussed at City Hall. Councilman Bob Blumenfield said he would be willing to ban donations from LLCs to boost transparency, but argued that the city shouldn’t squelch the voice of unions and advocacy groups by barring them from giving to campaigns.

Donations from unions or groups like the League of Conservation Voters are “an expression of many voices,” Blumenfield said. Members of unions might still give as individuals, but “I don’t know if they’re giving me a check because they care about union issues or they just like what I do for the community.”

Councilman Paul Krekorian echoed those concerns, saying that while he wanted to tackle the problem of donations from LLCs and other opaque entities, “I would not support something that would prevent the Sierra Club from making a contribution to me based on my exceptional record.... No public policy interest is served.”

Blumenfield said he also feared more money would go to “the dark world of independent expenditures.” Even if campaign donations from groups were barred, groups could keep giving as much as they want to independent expenditure committees, which are prohibited from coordinating with candidates but can raise unlimited amounts to back them.

Unions such as IBEW Local 18, which represents workers at the Department of Water and Power, routinely fund such committees, which are not subject to the $800 or $1,500 limit on contributions. The DWP union gave $800 to John Lee in a runoff this summer, but chipped in $30,000 to an independent committee that it sponsored, which spent over $300,000 to back Lee and oppose his rival.

The idea of prohibiting donations from groups was never formally rejected, but it hasn’t moved forward so far: City attorneys, who cautioned that banning groups from giving would require changing the City Charter, did not include it when they drafted a proposed ordinance enacting other reforms recommended by the Ethics Commission.

“If the council wishes to explore this charter amendment, we can report on the substance of the matter,” the city attorney’s office wrote in a September report.

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Councilman David Ryu, who championed the new restrictions on developer donations, said he recently tried to put forward a proposal to take the next steps toward banning “non-individual” donations, but couldn’t get enough support to introduce it.

Krekorian said he had been willing to cosponsor the proposal in order to kick off discussions, but “if we couldn’t get anyone else to sign on, we needed to do more groundwork.” He said he might put forward another, narrower proposal in the future.

Both Ryu and Krekorian argued that restricting LLCs would make it easier for candidates to adhere to the new rules on developer donations: Ryu, who has sworn off developer donations in his own campaigns, has ended up returning money from companies tied to developers.

His deputy campaign manager, Daniel Eyal, said that “when the donation comes from a business entity or LLC, it adds another layer of difficulty” to figuring out if the money is tied to a developer pursuing projects in Los Angeles.

Barring such donations is “a no-brainer for the sake of transparency and disclosure,” Ryu said, calling it “a discussion I hope we can continue having.”


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