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New political action group alleges improper tax and campaign filings by Village Laguna

New political action group alleges improper tax and campaign filings by Village Laguna
Workers set up a voting station at Laguna Beach City Hall before the polls opened for the Nov. 6 elections. The founders of local PAC Liberate Laguna allege that Village Laguna has not properly filed campaign finance reports. (Robyn Beck / AFP/Getty Images)

The founding members of a fledgling political action committee in Laguna Beach have filed complaints at the federal, state and local levels containing a variety of allegations against Village Laguna, a longstanding local activist group.

San Francisco lawyer Peter Bagatelos, who represents Sam Goldstein, Michael Ray and Cindy Shopoff — co-founders of the PAC, called Liberate Laguna — alleges in five complaints that Village Laguna does not file appropriate taxes or properly disclose campaign donations and that the organization has contributed more to local campaigns than is legally allowed.

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“[Village Laguna] has been operating as a PAC for many years and influencing and also putting money into campaigns without disclosing it,” said Shopoff, co-owner and executive vice president of Shopoff Realty Investments in Irvine. “I don’t have any problem with Village Laguna. I think that they are a fine organization and that they have done good work through the years. The only problem is, everybody should have to play by the same rules.”

Village Laguna, founded in 1971, promotes preservation of the city’s historical buildings and downtown and supports community programs.

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Bagatelos said he filed the complaints — signed by Goldstein, Ray and Shopoff — in November with the U.S. Internal Revenue Service, the California attorney general’s office, Fair Political Practices Commission and Franchise Tax Board, and the Laguna Beach city attorney and city clerk.

Laguna Beach artist and developer Louis Longi, who is not affiliated with Liberate Laguna, also signed the complaints to the FPPC and the city.

Village Laguna is taxed as a political organization, according to the IRS database. But because of the group’s activities such as preparing meals for homeless people at Laguna Beach’s Alternative Sleeping Location, donating food and giving out scholarships, Bagatelos argues it should have a separate tax filing as a charitable organization.

Records from the state attorney general’s office show Village Laguna last filed as a charity in 2001 and that the status expired in 2003.

“If you’re going to engage in a charitable activity, you need to be organized as a charity,” Bagatelos said. “Village Laguna engages in … everything under the sun.”

He pointed to the organization’s annual Charm House Tour, a bus ride featuring Laguna Beach homes and “iconic areas” for $50 to $60 a ticket.

“God knows what they’re using the money for,” Bagatelos said.

City Attorney Phil Kohn sent all the complainants a letter Nov. 21 saying he had received the complaints and that the city would begin looking into them by Dec. 15. In his letter, Kohn said he could decide to file a civil action or conduct a criminal investigation into Village Laguna if the situation warranted.

In a follow-up letter Thursday, Kohn said he would need more time to examine the matters.

Johanna Felder, president of Village Laguna’s board of directors, said the organization has two arms — a nonprofit and a PAC — with separate bank accounts for each. She said the accusation that Village Laguna improperly reported its finances from either account is false.

“I see these complaints as frivolous,” she said. “[Liberate Laguna members] would like us to go away so they don’t have to deal with somebody who wants to maintain the village character of Laguna Beach, so they can develop untethered.”

Shopoff, Goldstein and Ray founded Liberate Laguna as a PAC earlier this year. Within months, the group raised more than $150,000 from real estate and development companies and hefty donations from each of the three founders, according to disclosure forms filed in October. According to records a week before the Nov. 6 Laguna Beach City Council election, the PAC had contributed a total of $13,053 to candidate Sue Kempf and $12,573 to candidate Peter Blake, both of whom were elected for the first time. The PAC also spent $12,714 opposing incumbent candidate Toni Iseman, who was elected to her sixth term.

In campaign disclosure documents filed with the Laguna Beach city clerk, Village Laguna shows several contributions to itself over the years by Village Laguna Inc. The amounts ranged from $2,000 in August 2016 to $11,348 in June 2017.

“If the funds are being solicited from other sources and being transferred to the committee checking account, then the sources of the funds should be disclosed,” according to a complaint Bagatelos filed with Kohn and City Clerk Lisette Chel-Walker.

Richard Picheny, Village Laguna’s treasurer, said money does move from the nonprofit arm to the PAC arm and that the FPPC approved of the practice in a letter to the organization 15 years ago. According to the letter, he said, only individual contributions above a certain amount must be disclosed as campaign funds. Anything else — such as Charm House Tour tickets, membership dues and smaller contributions — can go toward the nonprofit account and then transfer to the PAC account, he said.

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“We earn money from the Charm House Tour and from membership dues and every couple of times a year ... we deposit that money into the account that’s used for campaigns,” Picheny said. “I believed I filed all forms that were necessary to be filed. I don’t know of any that were to be filed that I didn’t file.”

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Bagatelos said rules for campaign finance disclosures have changed since 2003 and that the letter no longer applies.

An anonymous complaint — which Ray and Goldstein have since acknowledged came from Bagatelos — was filed with the FPPC this summer, alleging that Village Laguna had failed to disclose a contribution from 2016 City Council candidate Vera Rollinger’s campaign committee. In a Nov. 6 letter to Felder and Picheny, the FPPC said it rejected the complaint because of “insufficient evidence.”

The Liberate Laguna founders refiled that complaint using their names, along with several new complaints about other disclosures. The FPPC has not ruled on those.

The complaints allege Village Laguna improperly labeled several expenditures to avoid filling out certain financial reporting forms that would require details such as the names of candidates the organization supported and the cumulative payment made to a candidate to date. In doing so, Bagatelos said, the group also exceeded Laguna Beach’s $360 campaign contribution limit.

None of Village Laguna’s campaign disclosure documents filed with the city clerk listed which candidates or ballot measures the organization supported.

“That’s not in the public interest is it, if you can’t tell who they’re supporting or opposing?” Bagatelos said.

Picheny said his understanding was that the forms the group did file don’t require listing candidates.

“We’ve never had any agency that we’ve filed with complain about anything that we’ve ever done,” Felder said. “We’ve done this ever since we became incorporated.”

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