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Source of Campaign Donations Hidden in Elaborate Shell Game

Alex Constantine - November 12, 2012

By Dan Morain

The Sacramento Bee, November 11, 2012

A California Common Cause leader convened a press conference and demanded answers: "Why are they trying to hide where their money comes from?"

The good government advocate went on to accuse Kansas oil billionaires Charles and David Koch of being the source of secretive donations in a highly charged California initiative.

If all this sounds familiar, it is. What's happening now happened in 1992, only this time, the California Fair Political Practices Commission and the attorney general are doing something about it, with help from a unanimous California Supreme Court.

Acting on a suit by FPPC Chairwoman Ann Ravel and Attorney General Kamala Harris, the court directed that Americans for Responsible Leadership, a Phoenix corporation, disclose details about an $11 million donation to a California committee set up to defeat Gov. Jerry Brown's Proposition 30 and pass Proposition 32, which would cripple unions' ability to raise campaign money.

Rather than submit to a full FPPC audit, the corporation's lawyers on Monday gave a partial answer. Americans for Responsible Leadership got the $11 million from another corporation, Americans for Job Security, based in Virginia. A third corporation, the Center to Protect Patient Rights, based in Phoenix, gave the $11 million to Americans for Jobs Security.

To sum up: a shell within a shell within a shell, crouching in a hall of mirrors. Money laundering isn't too strong a term. Welcome to the world of Citizens United, the 2010 U.S. Supreme Court decision that emboldened the richest Americans to spend unprecedented sums to influence elections.

Exactly how the corporations got the $11 million is not altogether clear. These corporations don't make anything, other than mischief. These so-called social welfare groups are established to play politics, without following normal disclosure rules.

Derek Cressman, of California Common Cause, and others, me included, suspect the money comes from, as Cressman said, "Charles and David Koch and their billionaire allies."

The Kochs have gotten plenty of attention this year, having declared that they would spend tens of millions to defeat President Barack Obama. They have publicly disclosed some donations, but most of their money seems to be going through tax-exempt nonprofits with mom-and-apple-pie-type names that are not required to identify the contributors.

There are reasons to suspect the Kochs are behind the donations. Other news organizations have cited connections between the Kochs and the Center to Protect Patient Rights.

Although the Center to Protect Patient Rights won't file its 2012 tax return until next year, its 2010 tax return shows that it gave $60.8 million to conservative groups - Americans for Job Security, for example, got $4.8 million - to help Republicans take control of Congress.

Koch spokeswoman Melissa Cohlmia issued a statement in which she said the Kochs "have not provided any financial support in favor of either Proposition 32 or Proposition 30, and are not involved in these issues."

No one directly said they did.

Giving money and maintaining plausible deniability seems to fit the Kochs' style, going back 20 years, the first time I wrote about them. Back then, Forbes valued their fortune at $3 billion. It was a simpler time. This year, Forbes placed their worth at $31 billion apiece.

Back in the day, the Koch-funded Citizens for Congressional Reform contributed $280,000 to pass the initiative that brought about California's legislative terms limits in 1990.

In 1992, their allies pushed a new California ballot measure, one to limit congressional terms. A Koch spokesman denied at the time that they were involved.

But the group that promoted the 1992 initiative received a mailing list of potential donors from Citizens for Congressional Reform. And the initiative's official proponent managed a libertarian bookstore in San Francisco owned by a nonprofit corporation that received money from yet another nonprofit that received Koch money.

Kim Alexander was the Common Cause leader who wagged her finger at the Kochs 20 years ago. She has moved on, though she still tries to make democracy more transparent through her California Voter Foundation.

"What the Kochs figured out is that you can get a lot of public policy changes at the state level without people noticing that there is a pattern," Alexander said.

Spending $11 million to pass Proposition 32 is a great way to influence policy. Fearing Proposition 32 would eviscerate their ability to raise money for politics, unions have spent more than $60 million to defeat it, money that didn't go to help Obama and other Democrats.

Americans for Responsible Leadership has branched out beyond Proposition 32, spending $2.4 million to defeat Obama.

Americans for Job Security has kicked in another $15.2 million to defeat Obama. Where they got their money, and what they're trying to hide isn't known, not exactly.

Dan Morain writes for the Sacramento Bee and can be followed on Twitter @DanielMorain.


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