Politics & Policy

Koch Brothers Caught Up in California Crackdown on Hidden Political Donors


David Koch on Aug. 29, 2012 in Tampa, Florida

Photograph by T.J. Kirkpatrick/Corbis

David Koch on Aug. 29, 2012 in Tampa, Florida

Two nonprofit groups connected with the billionaire Koch brothers are part of a $16 million settlement with the state of California for funneling money to political campaigns without properly disclosing their donors.

California Attorney General Kamala Harris and the state’s campaign finance regulator, Fair Political Practices Commission, reached a settlement that includes a combined $1 million fine for two Arizona-based organizations described by regulators as “part of the ‘Koch Brothers’ Network’ of dark money political nonprofit corporations.” The agreement also forces two California campaign committees to disgorge $15 million received without proper disclosure.

The settlement centers on a rush out-of-state funds drawn to campaigns last year over two ballot measures: the effort to defeat Proposition 30, a measure that sought to raise the sales tax and boost income taxes on the wealthy to increase education funding, and the drive to support Proposition 32, which sought to limit political contributions made by unions. Neither effort supported by the funds proved successful, as voters last year passed Prop. 30 and rejected Prop. 32.

California law mandates that donations over $1,000 made to advocate for specific ballot measures, rather than broad issues, must be disclosed. Money given closer to an election is seen by the law as likelier to be pegged to a specific measure. The settlement agreement outlines a web of nonprofit organizations that conservative fundraisers used “inadvertently, or at worst negligently” to hide the names of donors. As state officials untangled the donations, they found the the Koch brother’s Americans for Responsible Leadership was a source of $11 million in donations that were given through another Koch-linked group, the Center to Protect Patient Rights, as an intermediary to a California campaign committee. The settlement doesn’t allege that the Koch brothers directly funded the efforts, but rather their network of nonprofits and allies enabled the evasion.

As the Los Angeles Times explains, the settlement also doesn’t force the groups to disclose the names of donors. “Only a haphazardly redacted list of names, uncovered by state officials through their investigation, provides clues to some of the original donors’ identities,” the paper wrote, going on to list the known name:

Charles Schwab, the San Francisco investor, gave $6.4 million. The Fisher family, owners of clothing retailer Gap Inc., where Brown’s wife was once an executive, donated more than $9 million. Los Angeles philanthropist Eli Broad provided $1 million, despite his public support for higher taxes on high-earning Californians. And casino owner Sheldon Adelson, one of the biggest Republican donors in the country, and his wife gave $500,000. B. Wayne Hughes, founder of Public Storage, donated $450,000.”

(The Huffington Post posted a PDF of the document, and the New York Times has other original documents from the investigation in the sidebar here.)

California is one of several states, including Montana and New York, that are trying to create and enforce campaign finance rules that are stricter than federal laws. California’s state regulator called this a “record” settlement.

Weise_190
Weise is a reporter for Bloomberg Businessweek in New York. Follow her on Twitter @kyweise.

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