California Shows the Way in Combating ‘Dark Money’ in Politics

California’s political campaign watchdog agency, the Fair Political Practices Commission, lowered the boom on secretive political spending by levying $1 million in fines and directing two shadowy groups to pay $15 million in penalties for violating state laws meant to shine a bright light on the sources of political campaign spending.

The penalties — the largest in state history — grew out of efforts by conservative political groups to influence two state ballot initiatives last year that would have increased taxes to help balance the state’s battered budget, and reduced the ability of unions to raise money for political campaigns. The budget initiative passed, and the anti-labor measure was defeated, which means the groups incurred the record-setting penalties in losing causes.

According to The Sacramento Bee, the FPPC targeted two nonprofits tied to the Koch brothers through which Californians funneled million-dollar donations to state political campaigns while evading public disclosure:

The Arizona-based groups, the Center to Protect Patient Rights and Americans for Responsible Leadership, are part of a network of nonprofits operated by billionaire businessmen Charles and David Koch, agency officials said. The brothers have used their groups, which aren’t required to reveal the names of donors, to fund a variety of pro-business and anti-union efforts.

The settlement didn’t require release of the original individual donors to the effort. But a sloppily redacted document released by the FPPC shows that all but six of 132 contributions came from California donors.

The commission also sent letters to two committees demanding they pay the state general fund the improperly reported $15 million they received.

The Bee said the released report ties some of the contributions to office addresses used by the Gap-owning Fisher family in San Francisco, and Eli Broad in Los Angeles.

The Los Angeles Times reported that the donations appeared to have been made to get around California reporting requirements:

After a heated court battle in the waning days of last year’s campaign, Americans for Responsible Leadership said it received the money from two other nonprofits — the Center to Protect Patient Rights and the Virginia-based Americans for Job Security. But both of those organizations also keep their donors secret, and state officials vowed to continue investigating.

Although such nonprofits do not need to disclose their contributors under federal law, a California regulation says they cannot conceal a donor’s identity if the contribution was intended for a state campaign.

The Washington Post drilled into the fines and penalties, writing in an editorial that the FPPC’s investigation offers “a rare glimpse of the dark money coursing through U.S. politics” and includes “important lessons for the whole country.” The Post notes:

What’s revealing about the case is the way the nonprofits were used to hand off contributions to each other while masking the true source of the donations. The weakness exposed here lies in IRS rules that allow dark money to slosh around in nonprofits. The California commission showed a seriousness in pursuing the investigation that hasn’t been in much evidence at the Federal Election Commission, which is hampered by partisan gridlock.

Fortunately, the Senate recently approved President Obama’s two nominees to the commission, Ann Ravel and Lee Goodman. Ms. Ravel, a Democrat, was head of the California commission until this week. In announcing the results of the dark-money probe in Sacramento, she said, “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 good news for the nation: Ravel has just joined the Federal Election Commission.

—Posted by Scott Martelle.