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Donation by Ariz. group called 'money laundering'

Posted: November 5, 2012 6:00 p.m.
Updated: November 5, 2012 6:00 p.m.

Jason Torchinsky, an attorney Americans for Responsible Leadership, argues against a lawsuit concerning the source of an $11 million political contribution from the Arizona-based nonprofit, during a hearing in Sacramento Superior Court on Oct. 31.

 

SACRAMENTO, Calif. (AP) — An Arizona nonprofit disclosed Monday that two conservative groups were behind its $11 million campaign contribution to a California organization fighting Gov. Jerry Brown's tax initiative, but the revelation shed little light on who provided the money since those groups don't have to report their contributors.

The California Fair Political Practices Commission, the state's political watchdog agency, termed the donationfrom Americans for Responsible Leadership the largest case of "campaign money laundering" in state history.

The commission can levy fines but can do nothing to stop any campaign spending the group might be part of, including any ads it may have helped to buy. Meanwhile, California Attorney General Kamala Harris said she would continue investigating to determine whether any laws were broken.

"This is not going to be over on Election Day," she said.

The $11 million donation came in the final weeks of the campaign and gave a boost to a group that is trying to thwart Brown's tax initiative and Proposition 32, which seeks to limit union influence in politics.

The commission took the group to court for failing to divulge the source of its funds, and eventually appealed the case to the state Supreme Court, where state officials argued that it was critically important information that voters needed before they cast their ballots.

In a rare Sunday decision, the California Supreme Court unanimously ordered Americans for Responsible Leadership to disclose who was behind the donation. The group threatened to take the case to the U.S. Supreme Court but backed down Monday morning and disclosed it received the $11 million from a group called Americans for Job Security through an intermediary, the Center to Protect Patient Rights. Both are federally registered nonprofits that are not legally required to disclose donors.

Americans for Job Security has been active in the presidential race, pouring millions of dollars into swing states for independent expenditure ads supporting GOP presidential nominee Mitt Romney and other Republican candidates, and the Center to Protect Patient Rights distributed more than $44 million to more than two dozen conservative advocacy groups during the 2010 midterm elections, according to the Center for Responsive Politics.

It reported that the group's president, Sean Noble, is a political operative for the billionaire brothers Charles and David H. Koch, who have given millions to conservative causes. Noble did not immediately return messages by email and phone to his Phoenix-area number from The Associated Press on Monday.

The Alaska Public Offices Commission investigated Americans for Job Security after the group spent $1.6 million on a 2010 referendum campaign there, concluding that "Americans for Job Security has no purpose other than to cover various money trails all over the country," the New York Times reported in 2010.

Federal law allows nonprofits to keep the identities of their donors confidential. But California regulations require donors to be identified if they give to nonprofits with the intention of spending money on state campaigns in the state.

The Arizona group filed an amended state report on Monday disclosing the names of the two groups. It said in a letter submitting the documents to the state commission that it was not acknowledging any wrongdoing.

In a news release following receipt of the letter, the commission said the group's failure to initially disclose the two donors was campaign money laundering.

"This is the largest contribution ever disclosed as campaign money laundering in California history," it said.

The watchdog agency enforces the state's campaign finance and disclosure laws and can issue fines and penalties for noncompliance, although it refers legal violations to law enforcement agencies. The board's chairwoman, Ann Ravel, was appointed by Brown.

Harris, a Democrat, said the Arizona group's admission of the source of its funds, though opaque, is a first step.

"We are going to continue to take a look at this and examine the full scope of the conduct involved," she said.

She said the U.S. Supreme Court's ruling in the so-called Citizens United case, which allowed corporations and unions to spend unlimited amounts on political ads, indicated that protected political speech "is not and should not be thought of to be at the expense of disclosure."

ARL's $11 million donation went to the Small Business Action Committee PAC, which opposes Brown's tax initiative and a separate initiative that would limit unions' ability to collect money for political causes. Because the funds are mingled with other contributions to the Small Business Action Committee, it is not clear how much of the money went to support each of the group's positions on Tuesday's initiatives.

Three Phoenix-area men are listed on documents as directors of Americans for Responsible Leadership, which was formed last year: Steven Nickolas, president of Silver Sky Capital; Robert Graham, president of RG Capital Investors; and Eric Wnuck, an unsuccessful Arizona congressional candidate in 2010.

The group also has given more than $1.5 million to oppose two initiatives on the Arizona ballot, one that would raise the statewide sales tax to provide more money for schools and another that would modify the state's primary election system.

In California, the FPPC sought to perform an audit after California Common Cause filed a complaint. Kathay Feng, president of Common Cause, said the precedent set by the case "is a victory for voters and democracy."

"Though it shouldn't take weeks of legal suits, California voters now have the information they need to make informed choices on Nov. 6," she said in a statement.

During a brief appearance in Los Angeles Monday, Brown did not directly mention the Arizona group but urged activists to knock on undecided voters' doors and make phone calls to overcome the influence of shadowy money in politics.

"We've been up against a lot of money power — money power not only from California but from secret organizations throughout California, throughout America, that want to come and influence voters," he said at a get-out-the-vote rally in a Hispanic neighborhood in the city's San Fernando Valley.

 

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