MODESTO — In 2011 and 2012, Stanislaus County's Republican Party quietly became a player in state political finance, taking $1.7 million from big spenders and funneling most of it to superheated campaigns throughout California.
The metamorphosis was so hushed that some members of the county's central committee, the very group used by state party leaders to distribute the money, were unaware.
The California Fair Political Practices Commission, a state agency enforcing campaign ethics, confirmed to The Modesto Bee that the Stanislaus group's role in pooling and distributing cash is under investigation.
News of the probe has caused an uproar in the committee, particularly among members seated in January. Some say they got involved to help their party and were disturbed to find out about the money flow.
"To say there is a division is an understatement," said Mylinda Mason, a central committee member for more than 15 years. "It's unfortunate. It's alarming."
Jim DeMartini, the central committee's chairman and a member of the Stanislaus County Board of Supervisors, said the money channeling is perfectly legal and transparent. He is unhappy with "a few malcontents" on the committee whom he blames for creating a ruckus.
"In 20 years, I've never seen committee members acting like this," he said. "I don't know what their objective is, but they're certainly not team players."
This isn't the committee's first brush with the Fair Political Practices Commission.
Money transfers in 2008 caught the eye of the agency, which plans to bring to trial in November a case against Sen. Tom Berryhill, R-Twain Harte, and Bill Berryhill. The FPPC says the former used central committees in Stanislaus and San Joaquin counties to launder more than $40,000 for his brother, helping him win a close Assembly race.
The Stanislaus committee also got into trouble in 2009 for helping a San Diego politician launder money to his own campaign. Assemblyman Joel Anderson was fined $20,000 and the Fresno County Republican Central Committee was fined $29,000 for its role, but the Stanislaus committee got off with a warning letter.
About a year after the FPPC started investigating the Berryhills in 2010, party leaders created the California Republican Leadership Fund with central committees in three counties: San Luis Obispo, Tulare and Stanislaus. The fund is both the vehicle for funneling big money and the target of the current investigation.
Restrictions approved by California voters in 2000 limit donors from giving more than $4,100 directly to a candidate, per election. But donors can give as much as they want to entities such as the California Republican Leadership Fund, which began holding pricey fund-raisers such as a conference at The Grand Del Mar Luxury Hotel & Resort Spa and a Sonoma wine tour with spa treatments and golf rounds.
The fund then transfers money to central committees, and state party leaders control how the committees give it to candidates.
The system allows unlimited giving potential to powerful corporations and billionaires with stakes in policy-making. Last year, for example, businessman Charles Munger donated almost $43 million. A Modesto Bee review of filings found that $477,545 wound up with the Stanislaus central committee.
Rolling in dough
After the fund's birth, the central committee suddenly found its account flush with money from entities known for currying political favor: big oil, insurance companies, Indian tribes and various political action committees. In 2011 and 2012, the local central committee received nearly $1.9 million, all but a fraction from the fund, and more than a sixfold increase from its income during the prior two years.
The Stanislaus central committee, which historically has helped local candidates, last year passed $320,000 to Bill Berryhill, who ran for a Senate seat against Cathleen Galgiani. The committee also sent money elsewhere, including $205,000 to Pedro Rios of Bakersfield, $110,000 to Tony Strickland of Moorpark, who later switched to a congressional race, and smaller sums to other Southern California politicians. All lost.
DeMartini said Stanislaus was chosen because the Berryhill-Galgiani contest was among a handful of competitive races where leaders thought Republicans might stand a chance with appropriate support.
"We can fund candidates to a higher level" by participating, DeMartini said. "The whole purpose is to help members get elected, and it's completely legal. We have our donors and the Democrats have their unions."
The Stanislaus County Democratic Central Committee likewise received most of its campaign money last year from faraway donors, including labor unions, and sent money to distant races. Sums included $125,000 to Rios' opponent in Bakersfield, Rudy Salas; $130,000 to Torrance Democrat Al Muratsuchi; and four others. All won.
The Democratic central committee, however, received no single donation over the legal limit that year of $32,500 for such committees.
The California Republican Leadership Fund had no such burden, allowing big donors to cut a single check instead of several going to various central committees.
"It is a known tactic being used by both sides in certain regions," said Phillip Ung, spokesman for California Common Cause, which advocates for campaign reform. He compared it to ballot measure committees created by politicians, allowing them to raise money for sometimes questionable causes without the restrictions of individual campaigns.
Loopholes seem impossible to plug, Ung said, because that would be up to lawmakers who either created the loopholes or benefit from them, or both. Statewide initiatives, another option, are expensive, he noted.
"The system is broken," agreed Allan Hoffenblum, publisher of the California Target Book tracking legislative races. "The laws are stupid. Everyone knows it's wrong, everyone knows it's broken, and there has never been an attempt (by power brokers) to change it."
Jessica Levinson, a campaign finance and ethics expert at the Loyola Law School in Los Angeles, said, "We live in a system where the number of permissible constraints is increasingly decreasing."
DeMartini said the GOP's new fund helps candidates because "the state party is not that flush with money."
In any case, the FPPC reviewed the operation at the GOP's request before the fund was created and gave it a green light, according to documents obtained by The Modesto Bee, although leaders hoped it would be free from some reporting requirements that promote transparency.
"They signed off on it and said OK when we set it up. I don't know why they're looking at it," DeMartini said, adding, "they think there was collusion, but there wasn't."
Gary Winuk, the FPPC's enforcement chief, would not discuss the probe other than to confirm it.
The Stanislaus committee complied with an investigator's recent request for records regarding the fund, DeMartini said.
Taken by surprise
But the inquiry polarized the central committee, several members said.
"Most people had no idea this account existed," said Grant Hurst, an alternate. Others agreed, many adding that they're new to the committee.
Central committees promote party goals. Members are elected and alternates are appointed.
"I am concerned about things being done right," said Pat Bicknell, also an alternate.
Rod Olsen, a former member, resigned just after the issue exploded this summer, because he and his wife, Assemblywoman Kristin Olsen, moved out of the central committee district he represented. He said he was not aware of the fund and that the camp with questions wants to ensure everything is on the up and up.
Brett McBay, a Kristin Olsen appointee, said that tie is prompting him to "take a back seat" in the fund debate. "We're trying not to get involved in the messiness," he said.
Royena Cartwright and Mason characterized themselves as disinterested in committee finances, preferring to focus on public serv-ice.
Josh Whitfield, a Waterford City Council candidate, said, "I'm in the camp of doing what's best to help the party in our county. I don't believe anybody did anything maliciously wrong. If a mistake was made, we need to correct it quickly and get back to supporting Republican candidates and values."
Emma Alonzo said, "Everything is fine. Everything is taken care of. Nothing is going on."
Nancy Hinton referred questions to DeMartini and hung up.
John Freeman noted that the fund's income and outgo are available online for anyone who cares to look. "It's an entirely transparent process," he said.
Jim Vieira said the state inquiry appears to focus on an accounting error that raised suspicion because the central committee caught it and submitted an amended filing to correct it. "When you've got thousands of rules it's easy to do one thing wrong," he said.
Some campaign ethics experts said central committees always have been used as pawns of state parties. Operations such as the California Republican Leadership Fund, however, are rare, said Ung of Common Cause.
The fund heavily used the inaugural counties' central committees at first, funneling $4 million through San Luis Obispo, $1.7 million through Stanislaus and $1.4 million through Tulare in 2011 and 2012. Sacramento's central committee was drawn in last year, and other hefty contributions went in October to central committees in Alameda, Riverside and Yolo counties.
This year, the fund has focused on Tulare and San Luis Obispo, with money for Stanislaus and Sacramento slowing to a trickle, and none for the others.
The Stanislaus committee must also comply with federal campaign rules, which are enforced by the Federal Election Commission. During the 2011-12 election cycle, for instance, the committee reported receiving and spending about $339,000 on a variety of federal campaigns.
On Jan. 10, for instance, the committee reported receiving $10,000 from a state account controlled by Rep. Jeff Denham, R-Turlock, originally established when he set sights on the office of lieutenant governor before opting for Congress.
That same day, the Stanislaus committee reported giving $10,000 to a French Camp-based group called Citizens for Constitutional Government, for voter registration services. The group has received $48,000 from the central committee in the past two years.
Federal election rules can be cumbersome and complex, and records show that the committee's reports have regularly prompted Federal Election Commission follow-up questions. On Tuesday, an FEC analyst asked the committee about voter registration services and other issues identified on prior reports.
In the past two years, the Federal Election Commission has sent 15 such "requests for additional information" to the Republican committee. The Stanislaus County Democratic Central Committee has not received such requests during the same time frame, although the Democratic committee also has had to file fewer reports.
Sun-Star Washington Bureau reporter Michael Doyle contributed to this report. Modesto Bee staff writer Garth Stapley can be reached at firstname.lastname@example.org or (209) 578-2390.