Bombshell: Eli Broad Secretly Funded Anti-Public School, Anti-Union Initiatives
25 Oct 2013 | A state investigation revealed the identities of donors to a secret fund to oppose an initiative that would increase funding to public schools and to support an initiative to weaken the unions’ political influence.
Among the donors to the $11 million secret fund was billionaire Eli Broad. He publicly supported Governor Jerry Brown’s measure to raise taxes to help the state’s struggling public schools at the same time that he put $1 million into the fund to defeat the new tax.
Documents set off speculation about identity of secret donors
By Anthony York, LA Times | http://lat.ms/1dbDfis
October 25, 2013, 12:11 p.m. :: Documents released Thursday as part of a state investigation into the transfer of millions of dollars into California campaigns through a network of secretive nonprofit groups have set off a new hobby in state political circles -- trying to figure out the names on a partially redacted list of donors who ponied up the money.
The donors who gave a combined $28.9 million to the Virginia-based Americans for Job Security did so with a promise from California fundraisers that their identities would remain anonymous. But a donor list was included in the investigative file made public Thursday by state investigators, after they had announced a record $1 million in fines against two Arizona nonprofit groups that eventually received the money and funneled $11 million into California campaigns last year.
The list, which the Fair Political Practices Commission says originated with lawyers for GOP fundraiser Tony Russo, has some names crossed out but leaves others intact. Addresses are partially obstructed almost haphazardly. On one donation of $2 million that appears to be from San Francisco investor Charles Schwab, the San Francisco post office box number is left unobstructed, with only the letters “PO” marked off.
A $2 million donation dated Sept. 28, 2012 from a person or group that ends in “gies” and has a New York Ave NW address in Washington, D.C. that begins with “14” seems to suggest that the money came from Crossroads Grassroots Policy Strategies, a nonprofit group that has worked closely with another conservative nonprofit group, American Crossroads, started by GOP operative Karl Rove.
When asked about the donation, Crossroads GPS spokesman Jonathan Collegio refused to confirm or deny the money came from his group. “As it does every year, in a few weeks Crossroads GPS will report on all of its grant-making activity for 2012 as part of its Form 990,” he said in an email to The Times. “Until then, Crossroads doesn't comment on which groups are -- or are not -- grant recipients, except to say that all grants are unrestricted, undesignated and in furtherance of our social welfare purpose.”
The shame of secret political donors
By Michael Hiltzik
12:45 PM PDT, October 25, 2013
Thanks to the tenacity of the Fair Political Practices Commission, the names are now dribbling out of the campaign donors who secretly supported an anti-union measure and opposed a desperately needed tax increase on last year's California ballot.
As one might expect, it's a disgraceful roster of billionaires intent on pulling up the ladder of advancement behind them. Charles Schwab. Eli Broad. B. Wayne Hughes (founder of Public Storage). The owners of the Gap. Sheldon Adelson of the Las Vegas Sands.
But the FPPC's action in exposing these secret donors may have another laudable result: It tells the recipients of manifestly secret donations that they should know better who's buttering their bread. That's because the FPPC is seeking an $11-million disgorgement from the Small Business Action Committee, the conservative political group that got the secret money. That puts the SBAC in a painful spot, which is just where it belongs.
First, the original donors. Public documents identify them all as secret donors to Americans for Job Security, a Virginia group that eventually funneled the money to the Center to Protect Patient Rights, an Arizona organization affiliated with the right-wing billionaire brothers Charles and David Koch, which funneled it in turn to something called Americans for Responsible Leadership, which gave more than $11 million of it to the SBAC.
Are you having trouble following this? That's exactly what the donors hoped. In any case, the SBAC used the donation to fight Gov. Jerry Brown's ultimately successful tax increase ballot initiative and to support Proposition 32. Prop. 32, which failed, aimed to drive unions out of politics, leaving the field free for people like, well, Sheldon Adelson, Charles Schwab and B. Wayne Hughes.
Shortly after announcing its settlement with the the Center to Protect Patient Rights and Americans for Responsible Leadership (including payment of $1 million in fines), the FPPC lowered the boom on the the Small Business Action Committee, instructing it to fork over the $11 million it received through this daisy chain.
The SBAC's president, Joel Fox, is screaming foul. Fox has been around California politics for ages. He's a perfectly sincere conservative activist who knows the rules, and he says he complied with the law by naming Americans for Responsible Leadership as his donor. He says he checked out ARL and determined that it was "a legitimate organization." But he didn't go further to determine where it got its money. "We can't follow every dollar back," he says. "We didn't know there was anybody else" behind ARL.
That sounds mighty disingenuous. If Fox really did his due diligence on ARL he had to know that it was a front for someone else. One way or another, the question of where an organization appearing out of left field with an $11-million war chest just days before an election was a live one.
Fox argues that it's improper to bill the SBAC for $11 million, since it didn't break the law itself. But he's got to know that's not how disgorgement works. It's not at all unusual for ill-gotten gains to be seized, even from people who didn't break the law. If you receive stolen property, even if innocently, typically you have to give it up. And if you get money that was itself the product of illegal activity, the same principle does, or should, apply.
Fox notes that the SBAC doesn't have the money anymore, since it was spent on the election. That's tough. The goal of California's political finance laws is not only to keep dark money from coming into the state, but to keep it from making its way into political campaigns. The $11 million in lessons being taught the SBAC are: Don't spend crooked money, and have higher standards for what you consider "legitimate."
California fines groups $16 million for funneling money to campaigns
By Chris Megerian and Anthony York | LA Times |http://lat.ms/19I6BU9
October 25, 2013 :: SACRAMENTO — California officials are imposing a record $16 million in penalties on secretive political groups that funneled money into initiative campaigns in 2012, ending a yearlong investigation that showed gaps in state disclosure laws.
Two campaign committees in California are being ordered to pay a total of $15 million to the state, a sum equivalent to the donations they received, which regulators said were improperly reported. Two Arizona nonprofits, one linked to billionaire Republican donors Charles and David Koch, will pay a combined $1-million fine as part of a settlement.
The nonprofits are not being required to reveal their donors' identities, even though disclosure was at the root of the investigation. Under existing campaign finance laws, the state cannot force the groups to release the names, officials said.
"California law doesn't provide adequate disclosure of political contributions made through dark-money nonprofits," said Fair Political Practices Commission Chairwoman Ann Ravel, who announced the investigation's resolution Thursday along with the commission's largest-ever penalties.
The case highlighted how some big-ticket donors have sought to influence political campaigns by relying on off-the-books methods. Anonymous donations have exploded in popularity since 2010, when the U.S. Supreme Court ruled in the Citizens United case that many nonprofits can spend unlimited money on elections.
The controversial donations in California last year bankrolled two of the biggest conservative election causes: derailing Gov. Jerry Brown's ultimately successful tax hike and supporting an unsuccessful ballot measure intended to limit unions' political power.
Only a haphazardly redacted list of names, uncovered by state officials through their investigation, provides clues to some of the original donors' identities.
Charles Schwab, the San Francisco investor, gave $6.4 million. The Fisher family, owners of clothing retailer Gap Inc., where Brown's wife was once an executive, donated more than $9 million.
Los Angeles philanthropist Eli Broad provided $1 million, despite his public support for higher taxes on high-earning Californians. And casino owner Sheldon Adelson, one of the biggest Republican donors in the country, and his wife gave $500,000. B. Wayne Hughes, founder of Public Storage, donated $450,000.
None could be reached for comment.
The donors gave to Americans for Job Security, a Virginia trade association, as a first step in what officials characterized as a scheme designed to hide the original sources of campaign money. As the money was channeled to California, some of the transfers were not properly disclosed and therefore violated state law, officials said.
Thursday's announcement drew mixed reactions from experts and advocates, who praised state officials for their aggressive probe and expressed concern about loopholes in disclosure laws across the country.
It's rare for regulators to pursue such cases, said Paul S. Ryan, senior counsel for the Campaign Legal Center in Washington: "Voters don't have the information they need to make informed decisions on election day."
Phil Ung of California Common Cause, an advocacy group that filed the original complaint about the controversial donations last year, said new laws will be necessary to dissuade secret donors.
"You know they'll be back. And they'll be more sophisticated," he said.
The donations that were routed through the Arizona nonprofits were solicited by Tony Russo, a California-based Republican political consultant, according to state officials.
Russo did not return calls requesting comment. But a state interview transcript shows he told investigators he wanted to use nonprofits to help with California campaigns.
"Koch, our understanding was, had a pretty significant network of groups," Russo said. "So that's why we went to Sean."
Russo was referring to Sean Noble, a political operative who has worked with the Kochs and is president of the Arizona-based Center to Protect Patient Rights.
Donors wanted to remain secret, Russo said, "because of all the risk [of retribution] involved with the unions," the interview transcript shows, and Noble seemed interested in helping.
A spokesman for the Koch brothers and their company, Robert Tappan, said they had no involvement in the battles over Propositions 30 or 32.
Officials said Russo offered donors two options: provide money directly to a California group called the Small Business Action Committee and have your identities revealed, or give to Americans for Job Security, and remain anonymous because the law does not require that group to identify its donors.
The money sent to Americans for Job Security was intended for "issue advocacy," meaning advertising that doesn't expressly urge Californians to vote one way or another. Because of laws on how and when such funds can be used, the group passed the money to the Center to Protect Patient Rights in Arizona.
The center then sent $11 million to a Phoenix group, Americans for Responsible Leadership, which provided it to the Small Business Action Committee.
In another transaction, using a separate source of money, the Center to Protect Patient Rights provided more than $4 million to the America Future Fund in Iowa, which relayed the money to the California Future Fund for Free Markets, a campaign committee supporting Proposition 32.
The settlement the state reached with the two Arizona nonprofits said violations of California law were inadvertent, and the investigation did not result in any criminal charges.
Kirk Adams, president of Americans for Responsible Leadership, said people who have a problem with anonymous political money "can take it up with the First Amendment."
"What's happened here is an attempt to intimidate groups like ours from participating in California politics," Adams said.
Representatives from the Small Business Action Committee said they plan to fight the $11-million penalty.
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