Campaign mystery money case sheds light on big Calif. donors

The Sacramento BeeNovember 2, 2013 

SACRAMENTO — Jeff Miller, a fundraiser soliciting money for conservative causes in California's initiative wars last year, had a prospective contributor lined up, but he was apprehensive.

The donor employed union members, Miller was told in an email, and feared "potential disclosure and impact with his unionized employees."

It was a recurring problem, Miller and political consultant Tony Russo would tell investigators months later, as the state probed a network of out-of-state groups that funneled money into California through intricate channels to support Proposition 32 – a ballot initiative designed to weaken the political influence of labor unions – and oppose Proposition 30, Gov. Jerry Brown's effort to raise taxes.

"People are afraid of the unions in a multitude of ways in California," Miller told investigators, according to a transcript of an interview made public by the California Fair Political Practices Commission. "They're afraid of retribution."

When FPPC officials announced a settlement 10 days ago with political groups tied to billionaire businessmen Charles and David Koch, they touted their ability to hold the Arizona groups accountable by announcing a record $1 million fine.

Yet even as state regulators celebrated the outcome of the case — including a $1 million fine against two Arizona-based groups, the largest ever levied by the FPPC for a campaign violation — the limitations of their efforts were laid bare.

The information people wanted to know most of all had been the identities of individual donors, which remain perfectly legal for campaign organizers to conceal. Only because a document provided to the FPPC was sloppily redacted could any of them be identified.

After voters in 2000 approved Prop. 34, imposing new campaign finance limits on candidates, donors shifted contributions to independent committees. The U.S. Supreme Court's 2010 decision in Citizens United v. Federal Election Commission held that First Amendment free-speech protections prohibit limiting independent expenditures by corporations and labor unions, making it even harder for states to restrict independent expenditures.

"There's just so many ways to avoid, ways to get around reporting that I just despair," said Ross Johnson, a former state senator and former chairman of the FPPC.

"Up until the decision in the Citizens United case, I really thought it would be possible to design a system that guaranteed sunlight on the process and to give average people some assurance that people weren't buying and selling offices, and in the light of that decision, I've just kind of given up whatever optimism I had."

In soliciting donations to support their ultimately unsuccessful initiative campaigns, Miller and Russo offered prospective donors a choice: They could donate money directly to the California-based Small Business Action Committee or ballot measure committees advocating explicitly for Prop. 32 and against Prop. 30, or they could donate for broader issue advocacy purposes to Americans for Job Security, a nonprofit registered in Virginia.

One advantage of donating to the nonprofit for issue advocacy is that the law does not require individual donors to be disclosed, and more than 130 contributors selected this option.

"Whenever it comes up, I prefer not to be disclosed because no matter what I do, someone's going to be unhappy," said Michael Tennenbaum, a Southern California investment banker who gave a relatively small amount, $3,000, to Americans for Job Security.

Gary Winuk, the FPPC's chief of enforcement, said the document listing individual donors was provided to the FPPC, as redacted, by a lawyer representing Russo. The list includes donations that appeared to come from members of the Fisher family, which owns Gap Inc.; from billionaire casino mogul Sheldon Adelson and his wife, Miriam; and from Charles Schwab. Other apparent contributors include developer Eli Broad and Jeffrey Henley, chairman of Oracle Corp.

Henley noted he has a "relatively high profile" and declined to comment. The other donors or their representatives declined to comment or did not return calls for comment.

Tennenbaum, senior managing partner of Tennenbaum Capital Partners LLC, said "sunlight is the best disinfectant" and "I prefer to know who's backing whom and in what way."

Like other supporters of conservative causes, however, Tennenbaum said wealthy donors are unfairly targeted for disclosure while labor unions and their members are left unmolested, a charge the FPPC denies.

"I know this, that whenever there's a contentious issue, especially ones that are related to social policies, that there's going to be unhappiness," Tennenbaum said. "And, you know, I would rather not be known if I participate on one side or the other unless everybody's known."

In interviews with state investigators, organizers of the fundraising campaign for Prop. 32 and against Prop. 30 made clear the depths of their concern for donor privacy.

Stephen DeMaura, president of Americans for Job Security, told investigators he viewed protecting against "the potential risk of membership disclosure" as his "No. 1 promise to our members."

When organizers of the fundraising effort were told one donor, Ventura County businessman Gene Haas, who owns Haas Automation, wanted assurances that money would be spent in California, they said they could not provide such a guarantee because doing so "would trigger disclosure."

While the FPPC was preparing to announce its settlement in the case involving Props. 30 and 32, a variant of Miller's argument about donor intimidation was being tested in a courtroom in San Francisco.

Supporters of Proposition 8, California's 2008 gay marriage ban, argued before the 9th U.S. Circuit Court of Appeals last month that the names of their donors should be concealed because they had been threatened and harassed.

The appeal followed the overturning of Prop. 8 and a ruling by U.S. District Court Judge Morrison England Jr. in 2011 that proponents of the measure — who already had been identified — were subjected to relatively few and mild incidences of harassment.

He said they did not qualify for the same exception to campaign disclosure laws once granted to the Socialist Workers Party and National Association for the Advancement of Colored People.

Lawmakers responded to the out-of-state donations by introducing legislation designed to tighten disclosure rules, but three measures stalled in the Legislature this year.

Rhys Williams, a spokesman for Senate President Pro Tem Darrell Steinberg, D-Sacramento, said: "There will be action on the issue in the next legislative session. We're just deciding what would be the most effective course of action."


The Sacramento Bee's Christopher Cadelago contributed to this report. The reporter can be reached at (916) 321-1215, or @davidsiders on Twitter.

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