Dark Money Groups Pay $1 Million in Fines in California Case

http://feeds.propublica.org/~r/propublica/main/~3/iJPOP8bRZeI/

by Kim Barker

Two dark money
groups linked to conservative billionaire brothers Charles and David Koch have paid
a record $1 million in fines to California to settle allegations that the
combined $15 million they spent on two ballot proposals in the state was not properly
disclosed.
The civil settlement, announced Thursday afternoon in Sacramento, caps a year of
investigation into the activities of the two Arizona groups, Americans for
Responsible Leadership and the Center to Protect Patient Rights.
The settlement
disclosed new details in the case, including how the money was raised and how the
Center to Protect Patient Rights disguised its two contributions to two
California political committees. As part of the settlement, the Center to
Protect Patient Rights conceded it was responsible for funneling $11 million
through Americans for Responsible Leadership to a political committee spending money to fight a tax-hike measure and to support a proposition
restricting unions’ political power.
The Center to
Protect Patient Rights also gave an additional $4 million to another dark money
group, the American Future Fund, which gave the money to another political
committee spending on the anti-union measure.
“What is the takeaway
from this trail of dark money?” asked Ann Ravel, the outgoing head of California’s Fair Political Practices Commission,
which investigated the groups along with the state attorney general’s office.
“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.”
The state assessed one $500,000 fine to the Center to Protect Patient
Rights only, and another $500,000 fine to the two groups jointly. The state is
also demanding that the two political committees “disgorge,” or hand over, the $15 million they received in improper
donations through the Center to Protect Patient Rights before the end of
November. All of the money would go to California’s general fund.
In an interview, Gary Winuk,
the chief of enforcement for the California Fair Political Practices
Commission, acknowledged that the state may
have to go to court to recover that $15 million. One of the political
committees has already closed down.
The settlement says California authorities determined that
the Center to Protect Patient Rights “inadvertently, or at worst negligently,”
did not report itself as a donor to the American Future Fund. A similar
decision was made on the group’s lack of
disclosure to Americans for Responsible Leadership.
In a statement sent
through its lawyer, the Center to Protect Patient Rights said the commission recognized
it erred largely because it had never before made contributions in California
and that it had no intention 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 the lawyer, Malcolm Segal.
Americans for Responsible
Leadership did not return a message seeking comment.
Anonymous money funneled
through social welfare nonprofits and trade associations has become a major
factor in federal elections since the Supreme Court’s Citizens United decision
in early 2010 opened up the door to unlimited corporate and union spending on
outside ads, as documented by ProPublica. In
the past two election cycles, social welfare nonprofits have spent more than
$350 million, mostly from unknown donors, on election ads telling people to
vote for or against federal candidates.
Some national groups have
also started playing on the state level, particularly with ballot proposals.
The California
agreement, reached on Oct. 17, underscored how some states, such as California,
Idaho and Montana, have
actually done more to identify anonymous donors than the Federal Election
Commission. In June, New York Attorney General Eric Schneiderman imposed
regulations attempting to require disclosure for money spent on state elections. A new disclosure bill has been
introduced in California. This month, after a push by California’s Ravel,
regulators from 10 states
announced the launch of a nationwide effort to encourage the disclosure of
donors.
But the settlement
also highlights the limitations of investigations into who’s behind dark money
groups: Instead of unmasking some reclusive billionaire or shy corporation, regulators
often uncover yet another nonprofit, like a set of Russian nesting dolls. The original
sources of the money spent in California were not publicly identified, nor will
they be.
“A number of
donors did not want to be identified,” said Winuk,
the enforcement chief for California’s campaign finance regulator, who received
only a redacted list of donors for the original contributions.
And while the
groups have been linked to the Koch brothers, it’s not clear how exactly
they’re connected. The Center to Protect Patient Rights, which operates out of
a post office box in Arizona and doesn’t even have a website, has been
described practically like an ATM machine for various groups affiliated with the Koch brothers. The press release issued by California authorities says the Center and Americans for
Responsible Leadership “operated as part of the ‘Koch Brothers Network’ of dark
money political nonprofit corporations.”
The Kochs have
long been known for spending millions to influence elections behind the scenes,
through a complex network of groups that critics have nicknamed “the Kochtopus.” The Kochs themselves have remained determinedly in the background.
One link
between these two groups and the Koch network is Sean Noble, a GOP strategist
who runs two political consulting firms and is the sole employee of the Center
to Protect Patient Rights, which was launched in 2009. In 2010, he spoke on a
panel at a Koch brothers’ secretive retreat, small semiannual affairs that are invitation-only
and closed to the media. In 2010 and 2011, the Center to Protect Patient Rights handed out almost $60 million to conservative
groups that spent tens of millions on election ads. The Huffington Post
recently quoted a GOP operative describing Noble as “the wizard behind the screen” for the Koch network’s election efforts in 2012.
Noble did not
return a call for comment.
Another link is
Wayne Gable, a former top official at Koch Industries who has also served in
leadership roles in several nonprofits formed by the Kochs.
In 2011, Gable launched a new trade association that gave almost $115 million
to the Center to Protect Patient Rights over the following year. It’s not yet
clear how the Center doled out its money, as its tax return for 2012 isn’t yet
available.
The leader of Americans for
Responsible Leadership has close ties to Noble. Republican Kirk Adams hired
Noble’s firm in 2011 and 2012 to help run his failed campaign to replace
outgoing U.S. Rep. Jeff Flake in Arizona. Adams lost in the primary in August
2012; the next month, he was named president of Americans for Responsible
Leadership.
According to the
settlement, some $24.5 million of the money distributed by the Center to
Protect Patient Rights was raised by GOP strategist Tony
Russo for another organization,
Americans for Job Security, a Virginia-based trade association. (Russo didn’t
return calls for comment.)
Americans for Job Security
gave the money to the Center to Protect Patient Rights. Then the Center gave about $7
million to the Iowa dark money powerhouse American
Future Fund on Sept. 11, 2012; of that, the American Future Fund gave about $4
million to a new California committee, the California
Future Fund for Free Markets, which supported
the anti-union measure. That committee has since closed down.
The Center also
gave $18 million to Americans for Responsible Leadership in October 2012, recommending
that the group “should use the funds to support common social interests,
including support” for the Small Business Action Committee PAC, a committee
that Russo was also raising money for, the settlement said. Americans for
Responsible Leadership then gave $11 million to the Small Business Action
Committee PAC to spend on the two ballot proposals.
That $11 million contribution sparked a complaint, an
investigation and a court battle. Just before the election, Americans for
Responsible Leadership admitted that it got its money from the Center to
Protect Patient Rights, which in turn got the money from Americans for Job
Security.
The
fine is the largest in California history in a campaign-finance case.
The
manner in which the groups paid it speaks volumes about how dark their money really
is.
They
paid by cashier’s check, sent by a Sacramento lawyer’s office Thursday morning,
betraying no clue to the money’s origin.

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