FOLLOWING MONEY IN 2016 PRESIDENTIAL POLITICS

Friday, November 1, 2013

Arizona-based "Dark Money Groups" Pay $1 Million California Fine, Likely Hold Most Of Demanded $15M Disgorgement

While steadfastly maintaining their innocence and good faith, two Arizona-based conservative money groups have paid their $1 Million fine to California, and likely hold on to most of the $15 Million in disgorgement monies owed by their California-based allies.

Americans for Responsible Leadership ("ARL") and the Center to Protect Patient Rights ("CPPR") - both with close connections to major conservative moneymen the Koch brothers - signed the Settlement Agreement with California's Fair Political Practices Commission ("FPPC") last week, and it was announced at an October 24 news conference.  In it, they were found to have "inadvertently" violated California disclosure rules and agreed to the $1,000,000 civil fine; in return, the FPPC closed their year-long investigation and agreed to pursue $15 million in disgorgements from the two California groups (one, defunct) that received the violative contributions from ARL and CPPR.

The FPPC and ARL's spokesperson Barrett Marson confirmed to Arizona's Politics that the two $500,000 fines (one for each transfer back to California groups) have been paid.  For the following reasons, that is not surprising.

(ARL also contributed $1,500,000 to two Arizona committees fighting ballot measures regarding a state sales tax, and an open primary; click here for Arizona's Politics' analysis of what the California investigation says about the Arizona effort.)

The investigatory documents released by the FPPC after the settlement was announced provide a window into the arrangements between the California groups opposing two ballot measures (and their political consultants) and ARL/CPPR.

The California campaigns had initiated a strategy that gave potential donors an explicit choice - they could either donate money directly to the committees fighting the ballot measures and have their contributions disclosed under California laws, or they could become a member of non-profit Americans for Job Security ("AJS") with the understanding that their dollars would go to "issue advocacy" efforts and their names and amounts donated would not be subject to disclosure.

AJS received a flood of "memberships" and realized that a new California rule might result in them having to disclose donors' names for advertising close to the November election.  Because they trusted the Koch Brothers' network of funding organizations, they routed $24,550,000 to CPPR in September and October.  (Their understanding of the law was that this would protect the original donors from disclosure, because they would just identify CPPR/ARL as the donor.)

There was no written commitment that the CPPR network would return all of that money to the California efforts, but the belief was that they could ask CPPR for contributions as advertising bills became due.

However, only $15,080,000 was "contributed" by CPPR/ARL to the California groups before the FPPC took action to learn the original donors of the monies.  E-mails obtained by the FPPC in this year's investigation show that CPPR/ARL told the consultants in California that the legal action prevented them from making any more transfers.

Thus, CPPR/ARL continued to hold on to $9,470,000 in monies received from AJS.  $1,000,000 of that is now in California's general fund.  Even if CPPR/ARL holds on to $1,000,000 more for their expenses (legal, bookkeeping, public relations, etc.), that would leave approximately $7.5 million of monies that went from Donors ---> AJS ---> CPPR with the intended final destination of the two California committees (SBAC and CFF).  One of the two CPPR/ARL donations back to CA was to the American Futures Fund, which held back an additional $3 million for whatever reasons, before passing on money to the California Futures Fund to spend on the campaign opposing the ballot measures.

Thus, some $10.5 million of the original donors' money is presumably still sitting in bank accounts belonging to three major conservative money groups.  That would cover 2/3 of the disgorgement that California's FPPC contends that that state is entitled to under law.

(ARL also contributed $1,500,000 to two Arizona committees fighting ballot measures regarding a state sales tax, and an open primary; click here for Arizona's Politics' analysis of what the California investigation says about the Arizona effort.)




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