Big penalties but limited disclosure in secret campaign donor case


SACRAMENTO -- California political campaign committees that received money from a secretive network of conservative nonprofits last year, including $11 million from an obscure Arizona group, face hefty penalties from state regulators, officials announced Thursday.

The penalties are equivalent to the amount of political donations that California officials say was not properly disclosed.

The Small Business Action Committee, which fought Gov. Jerry Brown’s tax-hike plan and supported a separate ballot measure aimed at reducing unions’ political power, is being ordered to pay $11 million to the state.


A second committee, the California Future Fund for Free Markets, that backed the anti-union measure faces a $4.08-million penalty.

Both committees received money routed through the Arizona-based Center to Protect Patient Rights, a nonprofit with ties to billionaire Republican donors Charles and David Koch.

State law says campaign committees that receive “laundered” political funds need to forfeit the money to the state. The penalties, totaling $15 million, can still be contested.

State officials say they have also reached a settlement with the two Arizona nonprofits -- the Center to Protect Patient Rights and Americans for Responsible Leadership -- involved in the $11-million donation received by the Small Business Action Committee.

The settlement requires the organizations to pay a combined fine of $1 million, but it does not mandate the release of donors’ identities, a setback for California officials who have tried to require increased disclosure.

“The Commission today recognized that [Center to Protect Patient Rights] acted in ‘good faith’ and that there was absolutely no intent to violate campaign reporting rules. Also, the California Attorney General conducted a complete and thorough investigation and agreed that the conduct was unintentional and inadvertent,” said Malcolm Segal, attorney for the organization, in a statement released Thursday.


Ann Ravel, the chair of the Fair Political Practices Commission who is leaving her position for a seat on the Federal Election Commission, said California needs even stronger laws to require disclosure of donors’ identities.

“California law doesn’t provide adequate disclosure of political contributions made through dark money nonprofits,” she said.

When the $11-million donation arrived from an obscure Arizona nonprofit called Americans for Responsible Leadership in October 2012, state officials launched an investigation into whether California campaign finance laws were broken.

According to the settlement, a California political consultant was raising money in 2012 to fight higher taxes from Proposition 30 and support reducing unions’ political power through Proposition 32. The consultant offered donors two options -- contribute directly to the Small Business Action Committee and have their identities disclosed, or give money to Americans for Job Security, a trade association in Virginia, and keep their identities secret.

The money sent to Virginia was handled carefully to avoid triggering disclosure requirements in California. When Americans for Job Security sent money to the Center to Protect Patient Rights in Arizona, there were no stipulations on how the money would be used, according to the settlement.

The money then changed hands before reaching California. It was sent to Americans for Responsible Leadership, then soon re-routed to the Small Business Action Committee.

The Center to Protect Patient Rights also provided $4 million to the American Future Fund in Iowa, which then passed off the money to the California Future Fund for Free Markets.

These transfers improperly circumvented disclosure rules in California, “depriving the public of the knowledge of the initial source” of the money, according to the settlement.


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Twitter: @chrismegerian