SACRAMENTO, Calif. (AP) — In a case seeking to unmask the murky multimillion-dollar trail of money pouring into state and national political campaigns, California's political watchdog agency on Thursday announced the largest fine in its history for campaign-reporting violations and ordered two political action committees to pay the state $15 million for failing to properly report the source
of funds spent in the 2012 election.
Teams of attorneys and researchers from two state agencies spent a year tracing the money used to oppose one California ballot initiative and support another, illustrating how difficult it has become to track the flow of money in state and national political campaigns. The groups that helped funnel the money were in numerous states, including Arizona, Iowa and Virginia.
The California Fair Political Practices Commission called the two groups that will pay the $1 million fine "part of the 'Koch Brothers Network' of dark money political nonprofit corporations." The reference is to billionaire brothers Charles and David H. Koch, who have given millions to conservative causes across the country.
The $15 million in payments ordered to California's general fund stem from separate out-of-state contributions last fall that drew scrutiny from state regulators:
— $11 million that the Laguna Niguel-based Small Business Action Committee received from a nonprofit based in Phoenix called Americans for Responsible Leadership, which received the money from another Phoenix-based nonprofit, the Koch-backed Center to Protect Patient Rights. That group did not report the contribution.
— $4 million that went to the Iowa-based California Future Fund for Free Markets Yes on Proposition 32 through the American Future Fund, which received the money from the Center to Protect Patient Rights. That money also was not reported to the state.
In the settlement between the state and the nonprofits, to be filed in Sacramento County Superior Court, Americans for Responsible Leadership and the Center to Protect Patient Rights each agreed to pay a $500,000 fine.
The state's investigation began with the $11 million contribution last fall to a California group that was fighting Gov. Jerry Brown's November ballot initiative to raise taxes and supporting another one to limit the power of unions. Voters ultimately approved Brown's tax increase and rejected the limits on unions.
Just days before the election, the Fair Political Practices Commission and state Attorney General Kamala Harris sued Americans for Responsible Leadership, which had no history of political activity in California, to force it to disclose the donors behind the $11 million, as required by California law.
The case went to the state Supreme Court just days before the election, and the court ordered the Arizona nonprofit to disclose who was behind the donation. The group threatened to take the case to the U.S. Supreme Court but backed down the day before the election 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 out-of-state, federally registered nonprofits that are not legally required to disclose donors.
"This case highlights the nationwide scourge of dark money nonprofit networks hiding the identities of their contributors," FPPC Chairwoman Ann Ravel said in a statement Thursday. Ravel was appointed by Brown, a Democrat.
Brown said the settlement shows that major loopholes remain in campaign-finance reporting laws.
"Secrecy and money don't mix well in a democracy," he said in a statement.
The Center to Protect Patient Rights said the state recognized as part of the settlement that the nonprofit did not intend to conceal any information from the public. Rather, the center said it erred "largely because it had never previously made any contributions" in California.
"The Commission today recognized that CPPR acted in 'good faith' and that there was absolutely no intent 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," Malcolm Segal, attorney for the Center to Protect Patients' Rights, said in a statement.
The state watchdog agency said the two groups that received the money and led the campaigns in California are required to make their respective $11 million and $4 million payments to the state general fund as a result of the settlement.
But Steve Churchwell, an attorney for the Small Business Action Committee, disputed that. He told The Associated Press that the group has no intention of paying the $11 million because the law applies only to candidate elections and not ballot initiatives. Further, he said his group was not part of the FPPC settlement and has not been found to have violated any campaign-finance laws.
"We fully disclosed the donations that we received, and we're not part of the settlement, there are no violations," said SBAC spokeswoman Beth Miller.
The California Future Fund has been disbanded since the election. A message left with its associate, American Future Fund, was not immediately returned Thursday and attempts by The Associated Press to reach its principal, Barbara Smeltzer, were not immediately successful.