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<h1 id="story_headline" class="entry-title" style="font-weight: bold; line-height: 1em; margin: 0px;">California FPPC issues record fine for failure to disclose source of mystery money</h1>

<div class="byline" style="margin: 8px 0px;">By <a href="http://www.sacbee.com/search_results/?sf_pubsys_story_byline=%22Laurel%20Rosenhall%22&link_location=top" title="Read more articles by Laurel Rosenhall" style="outline: 0px; text-decoration: none;">Laurel Rosenhall</a>

<a href="mailto:lrosenhall@sacbee.com" style="outline: 0px; text-decoration: none;">lrosenhall@sacbee.com</a></div>

<div class="published" title="2013-10-25T00:00:00-0700" style=" padding: 0px;">Published: Friday, Oct. 25, 2013 - 12:00 am</div>

<div title="2013-10-25T06:16:16-0700">Last Modified: Friday, Oct. 25, 2013 - 6:16 am</div>

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Political groups with ties to the conservative Koch brothers acknowledged Thursday they gave about $15 million to block a <a rel="nofollow" href="http://topics.sacbee.com/tax+increase/" class=" lingo_link lingo_link_hidden" style="outline: 0px; text-decoration: none; border: none; cursor: pointer; display: inline; font-style: normal;">tax increase</a> and weaken union influence in California last year without properly reporting the source of the money.

In a settlement with the state Fair Political Practices Commission, the groups agreed to pay a $1 million fine, the largest the agency has ever levied for a campaign violation.

The Arizona-based groups, the Center to Protect Patient Rights and Americans for Responsible Leadership, are part of a network of nonprofits operated by billionaire businessmen Charles and David Koch, agency officials said. The brothers have used their groups, which aren’t required to reveal the names of donors, to fund a variety of pro-business and anti-union efforts.

The settlement didn’t require release of the original individual donors to the effort. But a sloppily redacted document released by the FPPC shows that all but six of 132 contributions came from California donors.

The commission also sent letters to two committees demanding they pay the state general fund the improperly reported $15 million they received.

The Arizona groups jumped into <a rel="nofollow" href="http://topics.sacbee.com/California+politics/" class=" lingo_link lingo_link_hidden" style="outline: 0px; text-decoration: none; border: none; cursor: pointer; display: inline; font-style: normal;">California politics</a> for the first time last year to support Proposition 32 – intended to curb the ability of <a rel="nofollow" href="http://topics.sacbee.com/labor+unions/" class=" lingo_link lingo_link_hidden" style="outline: 0px; text-decoration: none; border: none; cursor: pointer; display: inline; font-style: normal;">labor unions</a> to raise political cash – and oppose Proposition 30, a <a rel="nofollow" href="http://topics.sacbee.com/tax+increase/" class=" lingo_link lingo_link_hidden" style="outline: 0px; text-decoration: none; border: none; cursor: pointer; display: inline; font-style: normal;">tax increase</a> pushed by Democratic Gov. Jerry Brown.

A Koch representative issued a statement denying that the brothers played a role in the California election.

“We had no involvement whatsoever, financial or otherwise, neither directly nor indirectly, on anything to do with Prop 30 or Prop 32,” said an emailed statement from Rob Tappan, who represents the Koch brothers, their foundations and the Koch Industries companies. “In addition, we did not give directly or indirectly to any nonprofit group in support or defeat of these <a rel="nofollow" href="http://topics.sacbee.com/ballot+initiatives/" class=" lingo_link lingo_link_hidden" style="outline: 0px; text-decoration: none; border: none; cursor: pointer; display: inline; font-style: normal;">ballot initiatives.</a>”

Representatives for the two Arizona groups said they simply made a reporting mistake.

“It was a good-faith error,” said Barrett Marson of Americans for Responsible Leadership. “There was no intent to skirt or deceive California officials.”

The lawyer representing the Center to Protect Patient Rights said his client got confused by California’s campaign finance laws because they create a “very complicated environment with many, many regulations.”

“This was the first contribution they had ever made in the state of California,” Malcolm Segal said. “They believed they were in compliance.”

Americans for Responsible Leadership gave $11 million to the combined effort just weeks before last November’s election, in the heat of California’s initiative wars. But it didn’t reveal that its money came from the Center to Protect Patient Rights until the FPPC brought the group to court. Americans for Responsible Leadership was a largely unknown group when the contribution came in, while the Center to Protect Patient Rights is more widely associated with the Kochs.

“Secrecy and money don’t mix well in a democracy,” Brown said in a statement. The Democratic governor said the case also shed more light on loopholes that allow some donors with political agendas to conceal their identity.

When donors give directly to a political campaign, their identities become public in campaign finance reports. When donors give to a nonprofit, however, the law does not require their identities be disclosed. Campaigns are allowed to use their money to expressly ask for votes, while the nonprofits are supposed to confine themselves to a broader discussion of issues.

“This is a nationwide issue. These groups exploit loopholes in the law to undermine the clear purpose of the law – to give essential information to the public,” Ann Ravel, the outgoing chair of the FPPC, said at a news conference announcing the settlement. “It’s important for people to know about campaigns, and who is financing them, in advance of elections so they can make thoughtful decisions when they vote.”

Ravel is scheduled to be sworn in Friday as a member of the Federal Elections Commission, which regulates campaign laws at the national level. She said she hopes the Legislature will reconsider a package of bills it rejected this year that would have required more disclosure in similar situations.

The partially redacted list the FPPC provided Thursday shows scores of donors from California.

The donor list includes more than $9 million from people with an address on Maritime Plaza in<a rel="nofollow" href="http://topics.sacbee.com/San+Francisco/" class=" lingo_link" style="outline: 0px; text-decoration: none; border-bottom-width: 1px; border-bottom-style: dotted; cursor: pointer; display: inline; font-weight: normal; font-style: normal;">San Francisco,</a> where the management company of the Fisher family, which owns Gap Inc., has its office. The first names listed match those of the family members. Notably, Gap Inc. also employed Brown’s wife, Anne Gust Brown, from 1991 until she left as chief administrative officer in 2005.

Another $500,000 came from a man named Eli, his last name redacted, whose address is listed as being on the 12th floor of a building on Wilshire Boulevard in <a rel="nofollow" href="http://topics.sacbee.com/Los+Angeles/" class=" lingo_link" style="outline: 0px; text-decoration: none; border-bottom-width: 1px; border-bottom-style: dotted; cursor: pointer; display: inline; font-weight: normal; font-style: normal;">Los Angeles.</a> Developer Eli Broad’s foundation is in an office on the 12th floor at 10090 Wilshire.

Foundations run by Broad and the Fisher family have poured millions into efforts to reduce the influence of <a rel="nofollow" href="http://topics.sacbee.com/teachers+unions/" class=" lingo_link lingo_link_hidden" style="outline: 0px; text-decoration: none; border: none; cursor: pointer; display: inline; font-weight: normal; font-style: normal;">teachers unions</a> in public education.

The list also shows contributions totaling $400,000 from the California American Council of Engineering Companies, a trade group that has been in conflict with Caltrans engineers. One name that was not redacted was that of Ventura County businessman Gene Haas, who gave $800,000. Haas, who owns <a rel="nofollow" href="http://topics.sacbee.com/Haas+Automation/" class=" lingo_link lingo_link_hidden" style="outline: 0px; text-decoration: none; border: none; cursor: pointer; display: inline; font-weight: normal; font-style: normal;">Haas Automation</a> in Oxnard, served 16 months in a halfway house in 2008 and 2009 after pleading to conspiracy to commit <a rel="nofollow" href="http://topics.sacbee.com/tax+evasion/" class=" lingo_link lingo_link_hidden" style="outline: 0px; text-decoration: none; border: none; cursor: pointer; display: inline; font-weight: normal; font-style: normal;">tax evasion.</a>

Neither he, the Fishers or Broad returned calls seeking comment.

Another $2 million appeared to come from financial services titan <a rel="nofollow" href="http://topics.sacbee.com/Charles+Schwab/" class=" lingo_link lingo_link_hidden" style="outline: 0px; text-decoration: none; border: none; cursor: pointer; display: inline; font-weight: normal; font-style: normal;">Charles Schwab.</a> A San Francisco post office box that is listed as Schwab’s mailing address on several government fillings appears on a list with a donor named Charles who gave $2 million to the effort on Oct. 12, 2012.

Just a day earlier, someone whose name was redacted in an email released by the FPPC sent an email to Charles Koch asking him to give money to oppose Proposition 32.

“I have committed an additional $2 million today, making my total commitment of $7 million,” the sender of the email says. “It would be great if you could support the final effort with several million.”

Evidence the FPPC collected shows that the Koch approach of using nonprofit groups to fund issue campaigns was appealing to California donors who wanted to support Proposition 32 and oppose Proposition 30 without disclosure. Ravel said almost $29 million “was given by donors who chose not to stand up for their political views but instead wanted to influence elections but hide from public view.”

Tony Russo, who was working as a fundraiser for a conservative group called Americans for <a rel="nofollow" href="http://topics.sacbee.com/Job+Security/" class=" lingo_link lingo_link_hidden" style="outline: 0px; text-decoration: none; border: none; cursor: pointer; display: inline; font-weight: normal; font-style: normal;">Job Security,</a> told investigators he began talking about anti-tax efforts in October 2011 with Sean Noble of the Center to Protect Patient Rights.

Russo said he had talked to donors who “liked the Koch model ... the way they have a network of (nonprofit committees) do issue advocacy,” according to a transcript of his interview with the FPPC.

The following year, in the midst of the initiative campaigns, lawyers advised him that millions they had raised could not be spent in California because it was too close to the election and could be seen as seeking to directly influence the vote.

Russo said he needed a place to put the money, and thought the Koch network might be able to help. He called Noble.

“I said, ‘Sean, you know, I have a big hiccup in California. We have money raised ... but I don’t think we can spend it in California. ... Can we support some of your national efforts and, in turn, do you have groups that can help us in California?’ That was pretty much as simple as it was,” according to the transcript.

Ravel said Russo then sent the money “to the Koch network with no strings attached, hoping that because that network has tentacles all over the country, some of the money eventually would find its way back to California campaigns, where the money was originally intended to go.”

Russo told investigators he first asked Noble to spend $4 million on the California initiative effort, then later asked for $11 million more as Election Day approached.

“I think I texted him and asked him if he could get us $11 million for California,” he said. He said he assumed the money wouldn't come from the patient-rights group because that was the committee he had sent his own money to, and he had told Noble it couldn’t be spent in California.

The FPPC on Thursday directed the recipient of that money, the California-based Small Business Action Committee headed by Joel Fox, to turn that money over to the state. It instructed a committee called the California Future Fund to pay the state $4.08 million.

“It’s required under state law,” said Gary Winuk, the FPPC’s chief of enforcement. “Just receiving a contribution where the true source is not disclosed means you have to give it up.”

Actually getting the money, however, will likely be a challenge.

The California Future Fund has closed its fundraising committee. The attorney for the Small Business Action Committee said his group is not required to pay the money, arguing that the California laws governing such payments apply to political candidates – not <a rel="nofollow" href="http://topics.sacbee.com/ballot+measures/" class=" lingo_link lingo_link_hidden" style="outline: 0px; text-decoration: none; border: none; cursor: pointer; display: inline; font-weight: normal; font-style: normal;">ballot measures.</a>

Furthermore, attorney Steve Churchwell said, his client was not found guilty of any violations and doesn’t have $11 million anyway.

“Not one dime of this money is sitting in a <a rel="nofollow" href="http://topics.sacbee.com/bank+account/" class=" lingo_link lingo_link_hidden" style="outline: 0px; text-decoration: none; border: none; cursor: pointer; display: inline; font-weight: normal; font-style: normal;">bank account,</a>” Churchwell said. “It all was spent on Props. 30 and 32.”

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Call Laurel Rosenhall, Bee Capitol Bureau, (916) 321-1083. Follow her on Twitter<a href="https://twitter.com/LaurelRosenhall" target="_blank" style="outline: 0px; text-decoration: none;">@LaurelRosenhall</a> Jeremy B. White contributed to this report.

• <a href="http://www.sacbee.com/search_results/?sf_pubsys_story_byline=%22Laurel%20Rosenhall%22&link_location=bottom" title="Read more articles by Laurel Rosenhall" style="outline: 0px; text-decoration: none;">Read more articles by Laurel Rosenhall</a>

Read more here: http://www.sacbee.com/2013/10/24/5850792/california-fppc-issues-record.html#storylink=cpy</div>

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<a href="http://kochcash.org/that-time-when-koch-brothers-dark-money-skewed-california-and-arizona-politics/">http://kochcash.org/that-time-when-koch-brothers-dark-money-skewed-california-and-arizona-politics/</a>

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<div>BUSTED koch dark $ CA:</div>

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California Secretary of State candidate Derek Cressman has made a career of fighting the billionaires who are trying to hijack democracy.

His biggest victory so far was a 2012 case that resulted in the largest fine for a campaign-finance violation in California history.

While he was working at Common Cause, Cressman and his colleagues discovered a dark-money trail that led directly from the Koch brothers to political work on two California referenda, Prop 30 (which raised taxes on the wealthiest Californians), and Prop 32 (which limited unions' ability to raise money for political purposes). The discovery propelled a dramatic $1.3 million judgment, made headlines, and kicked off a new wave of campaign reform in the state.

Last week, California Governor Jerry Brown signed into law a bill to make the sort of money-laundering subterfuge that case uncovered more difficult, and grassroots excitement is building for the prospect of real reform.

<h2 style="border: 0px; margin: 1em 0px 0.5em; padding: 0px; line-height: 1.25;">“Making Big Money Toxic”</h2>

Now, after twenty years of advocacy work with Common Cause and U.S. Public Interest Research Group, Cressman says people who care about the corrupting influence of money in politics need to take that message directly to the voters.

"The movement needs to be more election-focused," he says. "We need to show that candidates who are anti-reform … are losing candidates."

Disclosure is not enough, Cressman says. In California, "corporate Democrats" are winning races where both candidates take special interest money.

"Disclosing campaign contributions by itself doesn't give voters a choice, or present a downside to taking that money," he says.

"The only way to change things is to find a way for candidates to run without taking that money," he says. "We have to make big money toxic."

That's not such an outlandish goal in the Secretary of State race, which is a relatively low-dollar affair.

"Unlike Congressional races or even the state legislature, it doesn't draw nearly as much corporate money, because the office doesn't have the power to regulate any particular industry," Cressman points out.

Cressman's $500,000 in funds raised so far puts him second in a field of eight candidates. The frontrunner, Democratic state senator Alex Padilla, has outraised Cressman by a margin of 4-to-1, with $2 million.

Still, $2 million is a pittance for a statewide race in California, Cressman points out, where an effective TV ad buy costs $6 million per week.

Social media, word of mouth, and grassroots networking are critical to the outcome of the race.

<h2 style="border: 0px; margin: 1em 0px 0.5em; padding: 0px; line-height: 1.25;">Koch Brothers’ Network Partially Unmasked (and Fined)</h2>

Much of the energy behind Cressman's campaign comes from the high-profile case that exposed and turned back the Koch brothers' influence in California in 2012.

That story involved a dramatic unmasking of the corrupting influence of dark money groups in state and local politics.

Cressman was working for Common Cause in the fall of 2012 when he and his colleagues discovered  $15 million in contributions from undisclosed donors to oppose Prop 30, which sought to raise taxes on wealthiest in the state, and to support Prop 32, a so-called "paycheck protection" measure to further limit how unions can raise money and spend money during election season.

"I noticed the donations were linked to a guy named Sean Noble--that name rang a bell from previous research I'd done into the Koch Brothers," Cressman says. "We started digging and found an address in Virginia for a group that turned out to be 'ground zero' for dark money groups."

Cressman uncovered an illegal money-laundering operation. Californians – including big names like Eli Broad, Charles Schwab, and the Fisher Family, who own the Gap stores – were laundering their contributions through an out-of-state front group, in order to hide their support for the ballot measure.

Under California law, donors who seek to influence the outcome of a particular ballot measure -- unlike those who give money to more general causes-- must disclose their contributions.

<h2 style="border: 0px; margin: 1em 0px 0.5em; padding: 0px; line-height: 1.25;">Charles Schwab Emailed David Koch, Noting "Your Man," Sean Noble, Was Key</h2>

Common Cause filed a complaint, and the California Supreme Court met in an extraordinary emergency session by conference call on the Sunday before election day.

"Literally, it was front page news in all the papers on election day 2012," Cressman says.

The articles exposed that the donors had violated campaign law. This was particularly important because one of the measures they pushed, the anti-union paycheck protection act, purported to be about campaign finance reform.

Ten months later the state's Fair Political Practices Commission imposed a record settlement of $1.3 million, the largest campaign finance violation fine in California history.

The Court found that an in-state network of donors had approached the Koch brothers’ network to launder money for them, so they would not be associated with the effort.

In one juicy email, Charles Schwab urged David Koch to become involved and noted "your man" Sean Noble was part of the effort. Schwab also wrote, "I look forward to seeing you on the golf course."

Following on the news of that case, Governor Jerry Brown signed a bill to make such money-laundering subterfuge more difficult.

"That's important," says Cressman, "Because if they'd been slightly more careful, they could have got away with it. If it was a wink and nod: 'Here's $5 million and spend it how you want.' Then, 30 minutes later, 'Hey, we really care about this issue.'"

Under the new law those sorts of winking deals will be more difficult.

<h2 style="border: 0px; margin: 1em 0px 0.5em; padding: 0px; line-height: 1.25;">Whose “Return on Investment?”</h2>

Cressman is running on a platform that includes publicizing the "return on investment" corporate lobbyists get from the politicians they bankroll--including Padilla.

In the state senate, Padilla authored and passed "the most anti-consumer bill ever introduced in California," according to Mark Toney, executive director of the Utility Reform Network. The bill, which deregulates Internet-to-phone service, has the backing of the rightwing, pro-corporate American Legislative Exchange Council (ALEC has been uncloaked by the Center for Media and Democracy’s ALECexposed.org project. The Center and ALECexposed.org are now part of Progressive Inc., the publisher of The Progressive and progressive.org).

"It takes the public utility commission out of Internet-to-phone, which is the future of phone service," says Cressman, who calls the bill "disastrous" for consumers.

Telecom firms gave Padilla $108,732, Cressman reports in a campaign document titled "Cumulative Return on Investments in the Padilla Portfolio Since 2006".

"The Secretary of State race is a rare opportunity to talk about these issues," Cressman says.

<h2 style="border: 0px; margin: 1em 0px 0.5em; padding: 0px; line-height: 1.25;">The Power of the Secretary of State: Remember Florida’s Reviled Katherine Harris</h2>

Cressman's run was propelled, in part, by the realization that the next secretary of state will make critical decisions about the future of democracy in California.

California is almost the last state in the union to create a statewide voter database. Even after getting a $40 million Federal grant for the purpose, state Secretaries of State have, for the last decade, failed to produce a database, a failure which prevents the state from implementing same-day voter registration and other important reforms.

It's part "bureaucratic ineptitude," Cressman says, and partly due to the fact that past Secretaries of State have been term-limited state legislators who, according to Cressman, lack the managerial experience or will power the job requires.

"The stakes are so high," Cressman says. "We've got to try something different than a termed-out state senator looking to use this office as a stepping stone to Congress."

<h2 style="border: 0px; margin: 1em 0px 0.5em; padding: 0px; line-height: 1.25;">Cressman: The State Democratic Party Is Filled with Activists on Campaign Reform</h2>

Meanwhile, Cressman is trying to capitalize in his campaign on the public sense that citizens can fight the corrupting influence of money in politics and win.

"I've been incredibly pleasantly surprised at the vibrancy of the grassroots within the Democratic Party," says Cressman. "As an outsider, you have this impression of a party full of hacks, where everything is rigged," he adds. "In California, that is not true. The party is full of activists, and my message has been incredibly well received."

In his stump speech, Cressman says he will hold hearings in every Congressional district on amending the U.S. Constitution to overcome the Supreme Court's Citizens United and McCutcheon decisions, which have opened the floodgates to corporate and non-profit money to influence who wins elections.

He also calls for adding the top ten donors to every candidate and ballot measure to the official "voter information guide," which the California Secretary of State sends out.

He has been getting a lot of spontaneous applause at campaign events for these ideas.

Even in the wake of the Supreme Court's McCutcheon decision, which further expanded uncontrolled spending on elections by wealthy donors, Cressman is hopeful.

<h2 style="border: 0px; margin: 1em 0px 0.5em; padding: 0px; line-height: 1.25;">An “’All of the Above’ Strategy” for Restoring Democracy and Reforming Campaigns</h2>

At Common Cause, he says, he spent the last few years working on anti-Citizens United ballot measures.

"One year ago we attempted a statewide referendum, and it completely died in the legislature," Cressman says. "But this year, it sailed through committee. We could have a statewide ballot measure in 2014 in California. I've been leading with this in my stump speech."

Cressman favors an "all of the above" strategy to fight money in politics: tough disclosure laws, a Congressional drive for a constitutional amendment, state and local ballot measures, and electoral campaigns.

"One thing that holds us back is that individual activist get too focused on one silver bullet approach," he says by phone from California, adding that he was on his way to join in a citizens march against Citizens United.

"We need protests, marches, ballot measures, campaigns. We need all of that," he says.

- See more at: http://progressive.org/node/187707#sthash.0ysCxB3M.dpuf</div>

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<h2 property="dc:title"><a href="http://www.thenation.com/blog/171055/could-attorney-general-kamala-harris-turn-tide-dark-money" title="Could Attorney General Kamala Harris Turn the Tide on Dark Money? ">Could Attorney General Kamala Harris Turn the Tide on Dark Money?</a></h2>

<a href="http://www.thenation.com/authors/lee-fang">Lee Fang</a> <abbr class="published" title="2012-11-05T22:50:05-18000">on November 5, 2012 - 10:50 PM ET</abbr>

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A major misstep by a conservative nonprofit has led to a dramatic turn of events in the Golden State. In what was first a case of a mysterious Arizona group laundering political money for two key ballot initiatives in California, the scandal may quickly evolve into a criminal investigation that could rock the foundations of Capitol Hill by unmasking the most prominent dark money slush fund in the country.

It’s all up to Kamala Harris, California’s attorney general, who was elected two years ago on a platform of getting tough on white-collar crime. Her office told <a href="http://blogs.sacbee.com/capitolalertlatest/2012/11/fppc-accuses-arizona-nonprofit-of-money-laundering.html" target="_blank">reporters</a> today that she is laying out the options for either a criminal or civil investigation into this major secret money group.

First, some background:

• On October 15, a mysterious nonprofit in Arizona called Americans for Responsible Leadership <a href="https://s3.amazonaws.com/s3.documentcloud.org/documents/496604/col-money-arl-response.pdf" target="_blank">cut</a> a stunning $11 million donation to a committee in California dedicated to defeating Prop 30 (a ballot initiative to raise taxes to fund the budget) and passing Prop 32 (an anti-union effort to ban payroll deductions), but didn’t disclose where that money came from. The move violated a brand new rule in California mandating that even 501(c) nonprofits disclose the source of their donations.

• Three days later, on October 18, Common Cause, a government watchdog, filed a complaint with the California Fair Political Practices Commission asking for an inquiry. The commission, a state campaign finance regulator that puts the Federal Election Commission to shame with its aggressive pursuit of the public interest, took up the case and on October 25, advised Americans for Responsible Leadership that it had <a href="https://s3.amazonaws.com/s3.documentcloud.org/documents/496604/col-money-arl-response.pdf" target="_blank">25 hours</a> to comply with a request for information about the source of that $11 million check.

• Americans for Responsible Leadership hired Holtzman Vogel, a DC-area law firm retained for years by Karl Rove and other Republican leaders, to try to quash the FPPC’s requests, claiming at one point to a local judge that the Supreme Court’s Citizens United decision protected the group from having to disclose its donors. As the Sacramento judge <a href="http://www.mercurynews.com/california-budget/ci_21899632/attorney-arizona-group-accuses-california-watchdog-group-trying" target="_blank">accurately</a> observed, the Citizens United decision did no such thing.

• In a surprise last week, an appellate judge, without comment, agreed with the Arizona group in preventing the FPPC from action. This forced a late minute <a href="http://www.contracostatimes.com/elections/ci_21915313/state-court-appeal-sides-shadowy-arizona-group-and" target="_blank">appeal</a> that led to an emergency decision by the California Supreme Court, which ruled 7-0 on Sunday to force disclosure.

And that brings us to the revelation this morning that Americans for Responsible Leadership received the <a href="http://www.sbsun.com/elections/ci_21932215/fppc-releases-names-donors-who-made-secret-11" target="_blank">$11 million from</a> Americans for Job Security, a trade association based in Virginia. Americans for Job Security, founded by two Republican operatives who now handle media-buys for Karl Rove’s American Crossroads Super PAC, is just another coin-operated front group. In the past, corporations have given it large sums in exchange for negative advertising in campaigns and lobbying efforts.

In the letter to regulators, Americans for Responsible Leadership conceded that Americans for Job Security in turn received the $11 million from yet another nonprofit, this one called Center to Protect Patients’ Rights.

The FPPC’s chair, Ann Ravel, says the trail of dummy nonprofits is a clear sign that the Arizona nonprofit behind the $11 million donation was <a href="http://blogs.kqed.org/election2012/2012/11/05/state-watchdog-agency-accuses-arizona-group-of-money-laundering/?utm_source=rss&utm_medium=rss&utm_campaign=state-watchdog-agency-accuses-arizona-group-of-money-laundering" target="_blank">engaged</a> in “campaign money laundering.” It’s obvious to anyone that Americans for Responsible Leadership is still playing shell games. The two nonprofits it disclosed do not give any real information about the individuals or corporations that provided the money for the $11 million check.

Here’s why this now gets very interesting.

As I reported <a href="http://www.republicreport.org/2012/55million-koch-fronts/" target="_blank">exclusively in May</a>, the Center to Protect Patients’ Rights—the group that is, at this point, the closest thing we know about the origin of the $11 million in California—is the hub for billionaire donors to funnel cash to attack ad campaigns across the country. Sean Noble, the president of the group, is a key deputy to the Koch brothers’ political machine. He helps run weekly meetings with other Republican Super PACs to coordinate spending. As head of the Center to Protect Patients’ Rights, he doles out checks to various nonprofits that in turn use that money to pummel Democrats with negative advertising.

Noble’s strategy centers on brand marketing. To appeal to Catholic voters, his group will cut a <a href="http://www.republicreport.org/2012/55million-koch-fronts/" target="blank">check</a> to a right-wing religious nonprofit, like the Susan B. Anthony List, to run ads accusing Democrats of supporting abortion. To make an appeal to elderly voters, the Center <a href="http://www.republicreport.org/2012/55million-koch-fronts/" target="blank">finances</a> a nonprofit called the 60 Plus Association to run ads accusing Democrats of cutting Medicare. The list goes on, from organizations dedicated to scare tactics against Muslim Americans to Tea Party groups, Noble has channeled billionaire cash to a stunning array of different fronts that then air nasty negative ads during elections. The public only sees the brand at the end of the commercial, but never the true source of the money. Quirks in nonprofit law allow even the most modest forms of disclosure—the transfers from one group to the next—to be kept secret until over a year after the election. That’s why we learned about the transfers during the midterm elections only this year.

Noble’s group completely altered the shape of Congress. During the 2010 election cycle, Noble’ group funneled some $55 million, which in conjunction with the US Chamber of Commerce’s $75 million, lifted House Republicans into the majority, radically shifting the balance of power in Washington, DC. This year, it’s pretty clear that shadow money groups active in federal elections across the country are again depending on this pool of untraceable money.

The right-wing billionaire clique, rumored to be the same <a href="http://thinkprogress.org/politics/2010/10/20/124642/beck-koch-chamber-meeting/" target="blank">group of tycoons</a> who attend the <a href="http://www.republicreport.org/2012/koch-meeting-indian-wells/" target="blank">posh Koch strategy conferences</a>, is obessed with secrecy. They were quick to <a href="http://www.republicreport.org/2012/koch-meeting-indian-wells/" target="_blank">kick me out</a> of one of their confabs earlier this year, and have used every legal instrument available to prevent their names from being revealed. Accordingly, Center for Protecting Patients’ Rights pushes the limits of campaign finance law, but rarely violates it.

Even in California, a nonprofit can avoid disclosure laws by claiming to only support issue advocacy.

That’s where the operatives messed up. The $11 million they financed in California went to an <a href="http://www.foxandhoundsdaily.com/2012/10/the-11-million-gift-to-jerry-brown/" target="_blank">explicit campaign committee</a>, voiding any argument that the donation was in pursuit of an “issue” rather than a political campaign. There’s no grey area here; the money was part of a campaign donation, and its true donors, meaning the people behind the Center to Protect Patients’ Rights, must be disclosed.

Kamala Harris seems determined to pursue a criminal investigation. But will she?

The growing scandal resembles another eleventh-hour Koch campaign effort. In 1996, a resurgent Clinton administration came close to helping Democrats retake the House of Representatives. In the closing days of the 1996 election, a nonprofit group called Triad Management helped two other nonprofits air <a href="http://www.publicintegrity.org/2004/07/15/5967/kochs-low-profile-belies-political-power" target="_blank">$3 million</a> in television ads in twenty-six House races and three Senate races. The money saved Speaker Newt Gingrich’s majority.

A subsequent <a href="http://www.gpo.gov/fdsys/pkg/CRPT-105srpt167/pdf/CRPT-105srpt167-pt5.pdf" target="blank">investigation</a> <a href="http://www.publicintegrity.org/2004/07/15/5967/kochs-low-profile-belies-political-power" target="blank">found</a> that more than half of the Triad money came from an organization funded by David and Charles Koch, and that the money was spent disproportionately in areas where Koch Industries owned refineries and pipelines. The investigation also <a href="http://www.publicintegrity.org/2004/07/15/5967/kochs-low-profile-belies-political-power" target="_blank">found</a> that Koch Industries provided direct corporate money for the ads, an apparent violation of campaign finance law at the time.

At the time of the Senate investigation, Koch Industries had been building up its lobbying muscle to <a href="http://thinkprogress.org/politics/2010/09/21/119973/koch-mike-pompeo/" target="_blank">combat charges</a> relating to over 300 oil spills caused by the corporation in the mid nineties.

Just as The Wall Street Journal reported on many Triad-related documents, Koch received help from its allies in DC. In October of 1997, Senator Fred Thompson (R-TN)—then, the chair of the Senate Government Affairs Committee—moved to cancel hearings into the investigation.

Today, the dynamics are different, but the core issue is the same. A Koch-group was caught violating the law, and there’s a chance to uncover the truth about one of the biggest secret money efforts in American history. It’s likely that Koch and these billionaires will do anything it takes to prevent this current scandal from growing.

Attorney General Harris will decide whether or not to pursue an investigation into the $11 million donation. The result of the effort may reveal who really purchased Congress for the last two years, and the next two.

Katrina vanden Heuvel recently made the case against dark money on MSNBC's Up with Chris Hayes. Watch <a href="http://www.thenation.com/blog/171026/katrina-vanden-heuvel-dark-money-drowns-out-voice-people" target="_blank">here</a>.

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<div class="related-terms">Related Topics: <a href="http://www.thenation.com/section/campaign-finance">Campaign Finance</a> | <a href="http://www.thenation.com/section/election-2012">Election 2012</a> | <a href="http://www.thenation.com/section/politics">Politics</a></div>

</div>

===

A group with ties to the conservative billionaire Koch brothers has dropped $4 million to pass a ballot measure that would severely limit the political activity of labor unions.

The new committee has just one donation -- $4 million from the American Future Fund, a conservative nonprofit organization whose stated mission is to promote “conservative and free-market principles.”

The new committee, the California Future Fund for Free Markets, was opened Friday.

[Updated 3:42 p.m. A spokesman for the Yes on Proposition 32 campaign noted that the money came into a separate committee, and that the official campaign sponsors knew nothing about the donation. "We have absolutely nothing to do with it," said Yes on 32 spokesman Jake Suski.

When asked if the new money undermined the campaign's claims that unions and corporations would be equally impacted by the measure, he said, "Prop. 32 goes as far as the law allows in curbing political donations from corporations and unions."]

No on 32 spokesman Brian Browkaw said the donation illustrated that the initiative would hurt unions while leaving corporate influence in tact. "The very same corporate special interests who carefully exempted themselves from Prop 32 and who stand to benefit from its passage – Big Oil, billionaire businessmen and the Super PACs linked to the Koch Brothers and Karl Rove – are now spending millions to pass Prop 32 and advance their interests at the expense of everyday Californians," he said .]

The donation comes as new polls show support for Proposition 32 slipping from its original highs of more than 60% support among likely voters. Proponents say it would limit political activities of corporations and labor unions, but its opponents, led by the state’s largest worker groups, say it is aimed at tempering unions’ political influence while leaving wide loopholes for corporations to funnel millions into state campaigns.

Voters rejected two similar measures – one in 1996 and another backed by Gov. Arnold Schwarzenegger in 2005.

ALSO:

<a href="http://latimesblogs.latimes.com/california-politics/2012/09/poll-support-slipping-proposition-32.html">Poll finds support slipping for Proposition 32</a>

<a href="http://latimesblogs.latimes.com/california-politics/2012/09/california-teachers-union-gives-another-69-million-to-prop-32-fight.html">Teachers union gives another $6.9 million to Proposition 32 fight</a>

<a href="http://latimesblogs.latimes.com/california-politics/2012/07/california-good-government-groups-call-proposition-32-deceptive.html" target="_self">Good-government groups call Proposition 32 deceptive</a>

--Anthony York in Sacramento

<a href="http://latimesblogs.latimes.com/california-politics/2012/09/group-with-koch-brothers-ties-gives-4-million-to-proposition-32.html">http://latimesblogs.latimes.com/california-politics/2012/09/group-with-koch-brothers-ties-gives-4-million-to-proposition-32.html</a>

---

News broke this afternoon that the American Future Fund -- a Super PAC affiliated with the Koch Brothers – has just put $4 million from secret donors behind Prop 32.

If any doubts remained about who is truly behind Prop 32, we now know with absolute certainty. It’s been reported that this organization is tied to the Koch Brothers and Karl Rove, and was originally bankrolled by an oil company CEO from Iowa. But since Super PACs aren’t required to disclose their donors, we’ll never know where it all came from.

===

<a href="http://articles.latimes.com/2012/aug/19/business/la-fi-hiltzik-20120819">http://articles.latimes.com/2012/aug/19/business/la-fi-hiltzik-20120819</a>

[scary what google ads go with the LAT story]

<h1 class="multi-line-title-1">Proposition 32: A fraud to end all frauds</h1>

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<h2>Proposition 32, on the November ballot, is nothing but an attack by Republicans and conservatives on unions and their members.</h2>

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<div id="mod-article-byline" class="mod-latarticlesarticlebyline mod-articlebyline"><a href="http://articles.latimes.com/2012/aug/19">August 19, 2012</a>|Michael Hiltzik</div>

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</a><a class="pmPrint" title="Print" href="http://articles.latimes.com/print/2012/aug/19/business/la-fi-hiltzik-20120819" /></div><a class="pmPrint" title="Print" href="http://articles.latimes.com/print/2012/aug/19/business/la-fi-hiltzik-20120819">

</a><a class="pmPrint" title="Print" href="http://articles.latimes.com/print/2012/aug/19/business/la-fi-hiltzik-20120819"> </a>

<a class="pmPrint" title="Print" href="http://articles.latimes.com/print/2012/aug/19/business/la-fi-hiltzik-20120819">It was Lyndon Johnson who best understood that the key to political empowerment for the disenfranchised was to give them access to the electoral process. That's why he made passage of the Voting Rights Act of 1965 his top priority.</a>

<a class="pmPrint" title="Print" href="http://articles.latimes.com/print/2012/aug/19/business/la-fi-hiltzik-20120819">But it's doubtful he would think too kindly of a measure we might call the </a><a href="http://bit.ly/N6DpsA">Rich Persons and Corporations Empowerment Act</a> of 2012. During this election season, Californians undoubtedly will be hearing about it on TV and radio until their eardrums bleed. That's because it will be on the November ballot as Proposition 32, a wolf in sheep's clothing dressed up as the "Stop Special Interest Money Now Act."

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In this state, we've come to expect ballot initiatives sponsored by business interests to be, essentially, frauds. But it's hard to conceive how one could be more fraudulent than Proposition 32. If there was any doubt left that the initiative process has been totally corrupted by big business and the wealthy, this should put it to rest for all time.

Proposition 32 is nothing but an attack by Republicans and conservatives on unions and their members. Two previous attempts by the same gang failed at the ballot box, in 1998 and 2005. What's new about this effort is that it's dressed up as a broad reform aimed at "special interests," and it's even more union-unfriendly than its predecessors.

We'll start by examining what Proposition 32 purports to do.

On the grounds that "special interests have too much power over government," the measure bans direct contributions to California candidates by corporations and labor unions. It prohibits the collection of "political funds" from corporate employees and union members via payroll deduction, even if the employee or member voluntarily approves. (That's more stringent than the previous versions, which merely required that union members give written permission for political expenditures once a year.) Political funds include money spent for or against a candidate or ballot measure or for a party or political action committee, or PAC.

Sounds pretty good so far, doesn't it? "It looks temptingly like reform," says Trudy Schafer, program director for the League of Women Voters of California. "But it's not."

That's because Proposition 32 bristles with enormous loopholes tailor-made for businesses and their wealthy backers. To begin with, it exempts such common business structures as LLCs, partnerships and real estate trusts. If you're a venture investor, land developer or law firm, Proposition 32 doesn't lay a finger on you.

The drafters, who include conservative attorneys Thomas Hiltachk and Michael Capaldi, know full well that payroll deductions are how unions get almost all of their funds, and businesses get almost none of theirs.

The infusion of big money into politics has become a more important issue since the Supreme Court's infamous 2010 <a href="http://bit.ly/L3a40d">Citizens United decision</a> awarding free speech rights to corporations, as though they are people. The decision liberated corporations to contribute to electoral campaigns virtually without limitation. That has turbocharged fundraising by so-called super PACs such as Karl Rove's conservative American Crossroads, the Mitt Romney-supporting Restore Our Future, and the President Obama-supporting Priorities USA.

The Proposition 32 campaign says the measure is carefully crafted to comply with Citizens United, but if that's so, it's just another sign of how flawed and deplorable the Supreme Court ruling was. At the moment, according to the nonprofit Center for Responsive Politics, <a href="http://www.opensecrets.org/overview/blio.php">business outspends organized labor</a> 15 to 1.

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Today, no big business needs to mulct its employees for piddling weekly deductions for its PAC, when it can shovel out by the trainload any money it has collected via the sale of goods and services. Some corporations do take PAC contributions from employees by payroll deductions, but it's typically a tiny proportion, mostly concentrated among careerist midlevel executives and above.

"When corporations can just write a check from their general treasury, the idea that this is a meaningful restriction is ridiculous," says Richard L. Hasen, an <a href="http://electionlawblog.org/">election and campaign law expert</a> at UC Irvine. The share of corporate political spending coming from employee payroll deductions "has got to be a drop in the bucket, and putting it in there is just a fig leaf."

What about the Proposition 32 campaign's claim that the measure is all about, and only about, reducing the power of "special interests"? In the interest of being fair and objective, we should be very careful about the word we select to describe this assertion. So let's keep things simple: It's a lie.

How can we know? We can start by examining the campaign's contributors. As it turns out, the claim that you need a big-money ballot campaign to wipe out the influence of special interests carries its own contradiction, in the same way a skunk packs its own stench.

</div>

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Among the very top contributors to the campaign, according to public filings, are A. Jerrold Perenchio ($250,000), Thomas Siebel ($500,000), B. Wayne Hughes ($200,000) and Charles Munger Jr. ($992,000).

Perenchio, a billionaire Hollywood mogul, was <a href="http://bit.ly/NpR8fD">the second-largest individual political donor</a> in California from 2001 to 2011, with $16.9 million in contributions mostly to Republican and conservative interests, according to a compilation by the nonprofit Center for Investigative Reporting. He's contributed $2 million to American Crossroads and $500,000 to Restore Our Future.

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Siebel is a Silicon Valley billionaire perhaps best known in California political circles for his introduction of Sarah Palin, then the newly minted GOP vice presidential candidate, at a 2008 rally as "the embodiment of pure, unadulterated good," the <a href="http://bit.ly/RkqSsY">San Francisco Chronicle</a> reported. In 2010 he donated $250,000 to American Crossroads.

The Kentucky-based Hughes is the patriarch of the Public Storage empire. His donations to American Crossroads: $3.5 million, making him one of its top donors in 2010. He's given nearly $2.3 million to California political entities in the 2001-11 period, exclusively Republican.

Munger is a physicist who was the third-largest individual political contributor in California in 2001-11, with $14.1 million in contributions, mostly to GOP interests. His father, Charles Sr., has long been Warren Buffett's investment partner.

Whatever you might think about these individuals' political viewpoints, some things are crystal-clear: They're the special interests. They're the fount of the cash that, according to the Prop. 32 pitch, constitutes "the most corrupting influence in politics."

And most important of all: They're conveniently exempt from Proposition 32.

It doesn't matter that their wealth comes from corporations that would be barred from funneling money directly to candidates — Hughes from Public Storage, Siebel from Siebel Systems and Oracle, Perenchio from Univision. Their individual bank accounts remain unfettered.

If you've been wondering why people whose fortunes come from business would invest so much money to enact a measure that purports to limit the political influence of business, now you know.

Proposition 32 isn't designed to stop the flow of cash into California politics; it's designed to cede California politics totally to characters like this. Any of them could get anything he wants from Sacramento. Could you?

Another fact the Prop. 32 cabal doesn't want you to know is that donations to candidates and parties — the contributions most directly covered by the measure — constitute a tiny portion of corporate political spending in California. Power really resides in the initiative process, and that's where businesses put the big bucks.

Over the last two years, for example, the tobacco company Altria (formerly Philip Morris) has donated $33.5 million to California political campaigns. Less than $700,000 went to candidates or parties. Much of the spending went to defeat Proposition 29, this spring's tobacco tax initiative.

Then there's Pacific Gas & Electric Co. In 2009-10, PG&E spent $53.5 million on politics in California. Less than $600,000 went to candidates. Most of the rest financed the utility's majestically dishonest ballot initiative to kill public power programs.

</div>

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Because under Proposition 32 such spending could be financed out of money that business and wealthy individuals — but not unions — can access, the measure would tilt the initiative playground even further in business' favor.

The treatment of unions and corporations as though they're equivalent political players is an ideological fantasy. Unions are organizations whose members have democratic rights to vote on their leaders and their policies, political or otherwise. (Nonmembers represented by unions in collective bargaining already have the right to withhold dues attributable to strictly political activities.) Corporation owners, or shareholders, don't have democratic rights unless they hold controlling stakes.

When a union engages in politics, you know it's generally reflecting the interest of its members. When a corporation does, whose interest is it reflecting? Could be a few dozen people, one huge shareholder, or a CEO and his cronies on the board.

Moreover, as the labor expert Joseph Rauh observed decades ago, giving a political voice to an increasingly disenfranchised working class is fundamental to the role of organized labor. The fate of bills "affecting working men and their unions," he wrote, "may be of as great importance to union members as the collective bargaining process itself."

The message the perpetrators of Proposition 32 are sending to you, the California voter, is that they think you're stupid. Really, really stupid.

When you go to the voting booth or fill out your mail ballot this November, stop for a moment and ponder this question: Should I hand over my vote to people who think of me that way?

Michael Hiltzik's column appears Sundays and Wednesdays. Reach him at <a href="mailto:mhiltzik@latimes.com">mhiltzik@latimes.com</a>, read past columns at <a href="http://www.latimes.com/hiltzik">latimes.com/hiltzik,</a> check out <a href="http://www.facebook.com/hiltzik">facebook.com/hiltzik</a> and follow <a href="http://twitter.com/latimeshiltzik">@latimeshiltzik</a> on Twitter.

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