Nonprofits tied to legislators collect cash out of public view
SACRAMENTO — A federal allegation that state Sen. Ronald S. Calderon tried to hide a $25,000 bribe in a charity run by his brother has shed light on the use of nonprofits by California legislators to collect cash out of public view.
Some nonprofits, set up with the stated purpose of aiding a charitable or social cause, are also being used to benefit an elected official’s career, public image or personal finances, say advocates for open government.
FOR THE RECORD:
Nonprofits: A Nov. 17 article about nonprofits formed by state lawmakers reported that billboard company owner Mark Kudler said he donated in the last two years to the nonprofit Progress California, created by Assemblyman Isadore Hall (D-Compton). After the article was published, Kudler and Hall stated that Kudler did not contribute to the nonprofit.
Several current and former California politicians or their relatives have established nonprofits in recent years. Some spent more money on travel, meals or entertainment than on direct assistance to their causes, according to their tax filings.
“This has become a huge loophole,” a way to skirt campaign finance laws, said Jessica Levinson, an elections law professor at Loyola Law School.
Nonprofits like the one cited in the Calderon case allow politicians to collect contributions from special interests without having to abide by the $4,100 limit on campaign contributions in legislative races. And unlike political accounts, they are not required to identify their donors.
In addition, they can be vague in reporting on their tax returns how they spend their money. Nonprofits disclose expenditures in broad categories such as “travel,” “meals” and “meetings” without noting the purpose of the expense or who benefited.
Calderon, a Democrat from Montebello, allegedly accepted $60,000 from an undercover FBI agent posing as a studio executive in exchange for pursuing legislation to expand tax breaks for film companies, according to a sealed FBI affidavit made public by a cable network.
The agent agreed to pay $25,000 of the money to a nonprofit set up by the senator’s brother, former Assemblyman Tom Calderon, says the affidavit released by Al Jazeera America.
“We have this nonprofit. It is called Californians for Diversity,” Calderon told the agent, according to a transcript of a recording included in the document.
The group, Calderon said, was set up to advocate positions on issues being debated in California.
“Then Tom and I down the road, we build that up, we can pay ourselves,” the senator allegedly told the agent. “Just kind of make, you know, part of [a] living.”
Donations to nonprofits are disclosed by the giver in certain circumstances. Walmart, Cash Advance Centers of California and the Farmers Employees and Agents PAC all reported making contributions to Californians for Diversity during the last two years.
The nonprofit, formed in 2008, also received $25,000 from “Yes We Can,” a political committee of the California Legislative Latino Caucus, which made the donation in January.
The FBI affidavit alleges the “Yes We Can” donation was arranged by Sen. Kevin de Leon (D-Los Angeles) “in exchange for Ronald Calderon agreeing not to challenge Senator [Ricardo] Lara to become the Chairman of the Latino Caucus.”
“They are doing exactly what contribution limits are there to guard against,” said Levinson, a member of the Los Angeles Ethics Commission.
Calderon and De Leon have denied wrongdoing. None of those named in the affidavit has been charged with a crime.
Californians for Diversity was formed to “educate, inform, support and focus the California voters on the ‘bread and butter’ issues of California,” including jobs and schools, according to its latest tax filing.
In 2010, its tax records show, the nonprofit spent $29,101 — $21,500 of it on travel, food and beverages.
In 2011, the last year for which a tax filing was available, the group spent $56,049, with $11,006 going to civic donations. Slightly more was spent on travel or entertainment for public officials ($11,500). Other expenses included conferences and meetings ($5,742), polling ($5,000) and compensation to Tom Calderon ($2,500).
The leaked affidavit alleges that the nonprofit paid $5,000 to a Tom Calderon consulting firm this year.
Former Assemblyman Tony Mendoza, a Democrat from Artesia, is running for Ronald Calderon’s Senate seat next year. Four days before he stepped down as chairman of the California Latino Legislative Caucus in February 2012, the caucus’ foundation, which he also headed, donated $22,000 to the Southern California LEAD Foundation, a nonprofit founded by Mendoza’s wife.
Mendoza said neither he nor his wife benefit financially from the charity, whose stated purpose is to improve life for Hispanic youths. The couple declined to provide a full list of the foundation’s financial supporters.
“As the Latino Caucus Foundation chairman, I was involved with approving many charitable donations, including this one,” Mendoza said. “Mrs. Mendoza is an unpaid volunteer.”
The caucus’ check made up nearly half of the Mendoza foundation receipts of $46,267 last year, its federal tax filing shows.
The foundation spent $28,700 last year, $20,000 of it on travel, meetings and conferences and $3,150 on civic donations that included $250 each to the Early Childhood Federation and the YMCA.
Another legislator who uses nonprofits is Assemblyman Isadore Hall III (D-Compton). He formed Progress California in 2010 to help address obesity and diabetes in part by annually giving away turkeys to people in his district.
Of the $51,000 the nonprofit raised last year, about $14,000 went to food giveaways. The group’s tax form says $10,000 was spent on professional fees and $2,500 on bookkeeping but does not show how the rest of the money was spent.
A board of directors listed on the nonprofit’s website included billboard company owner Mark Kudler and Commerce Casino CEO Haig Papaian Jr. Hall chairs the Assembly committee that decides which bills live and die on billboard and gambling issues.
Kudler, president of the California State Outdoor Advertising Assn. — the lobbying arm of the industry — said he has given to Hall’s nonprofit in the last two years but didn’t know how much. He said it is “way off base” to say he expects anything from that support.
“I support him [Hall] because he does a lot of good things in the community,” Kudler said.
Some legislators have been more successful than others in setting up nonprofits.
Dean Florez, a Democrat from the Central Valley, left his state Senate seat in 2010 because of term limits. Before departing, he filed papers to register a new nonprofit called the Twenty Million Minds Foundation, with start-up funding of $1.7 million from billionaire medical inventor and co-founder Gary Michaelson.
Michaelson is the sole contributor to the nonprofit so far, a representative said.
The nonprofit was formed based on Michaelson’s idea to make some college textbooks available for free online, a representative said. Florez was paid $250,000 as president of the nonprofit and $30,000 in benefits in 2011, the last year for which a tax filing was available.
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