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Thursday, October 27, 2016

by Kim Barker ProPublica.

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.

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  • elw

    I believe that the biggest scandal of this century is the growth of black money in the influence of our elections and Federal, State and local governments. A recent study by the Sunlight Foundation found that just 1/2 of one percent of the richest people in this Country actually choose who runs for office through their dollar donations. That is just 33,000+ people who decide who we will get to vote for. Citizen United has not done this Country any favor. What it means is that the voter really doesn’t get to chose who they want to run, they only get to vote for candidates that have already been chosen for them. We have a pretend Democracy and desperately need to get the money influence out of politics and government before we no longer even have a pretend democracy to change. Link to the study below:

    • Allan Richardson

      Let’s be clear, before the Limbaugh clones cry crocodiles about African Americans having the same right to make political donations as others:

      You are referring to “black” meaning “secret,” as in the CIA or NSA “black budget,” NOT “black” meaning African-American donors.

      • elw

        Yes you are correct, but I used the wrong word, it should have said “dark” in stead of “black.” Sorry, my bad. But I assure you at not point was I thinking skin color.

  • weldonberger

    A million-dollar fine for the Kochs is equivalent to a $1.38 fine levied against somebody with a net worth of $100,000.

  • Bill Thompson

    Fines will not do the trick what needs to happen is to remove their 501 C4 status. This is a classic example of money laundering and abuse of a social welfare groups tax exempt status. $1 million is chump change to people like the Koch brothers. Just one more example of representative democracy being sold.

  • Allan Richardson

    Let’s hope the Roberts Court doesn’t nullify the California law..