California political watchdog collects more in mystery money case

01/24/2014 5:33 PM

01/25/2014 8:27 AM

When California’s political watchdog fined two conservative groups $1 million last year for not properly reporting $15 million in campaign contributions, it also told the recipients of the money to turn it over to the state.

At the time, one of the recipients – the Small Business Action Committee – put up a fight and said it had spent all the money it had received and didn’t plan to pay the state a dime.

The group is now changing course.

On Friday, the Fair Political Practices Commission announced that the Small Business Action Committee, headed by Joel Fox, has paid the state $300,000.

The money amounts to less than 3 percent of the $11 million the group received from Americans for Responsible Leadership, the Arizona-based group that admitted in October it had not properly reported its donations. Still, the FPPC’s chief of enforcement said the payment is significant – the second largest California has ever collected.

“$300,000 is a lot of money to any committee,” said Gary Winuk. “The purpose of the disgorgement law is to make sure even if you give a contribution and don’t disclose the true source, that every party down the chain is going to suffer the consequences, and I think that happened here.”

The FPPC’s pursuit of the campaign finance case has been watched around the country.

The Small Business Action Committee and another group called the California Future Fund were raising money to support Proposition 32 and oppose Proposition 30 on the November 2012 ballot. They received money from groups that acted as intermediaries in a large network of conservative fundraising groups with ties to industrialists Charles and David Koch, though the FPPC never uncovered evidence that the Koch brothers were themselves donors to the California effort.

By passing the money through several nonprofits, the groups were able to shield individual donors from being publicly identified as backing the effort to defeat Gov. Jerry Brown’s tax measure and pass one that would make it harder for labor unions to mount political campaigns.

Fox, president of the Small Business Action Committee, said his group did nothing wrong in accepting the $11 million contribution but decided to pay some money to the state to put the issue to rest. Winuk also said the group did not break any laws but was still compelled to give up the money.

“We understood that fighting this lawsuit would incur large attorney fees and could be tied up in court for years,” Fox said in a statement.

“Given that this is an election year with important issues we want to be engaged in, SBAC chose to put this lawsuit behind us.”

The California Future Fund signed a document saying it is supposed to pay the state $4.08 million it received from a group that improperly reported its contribution. But the committee is closed and Winuk said he thinks it’s “extremely unlikely” that California will collect any more money in that case.

Still, he said, getting the groups to acknowledge that they owe the state the money “serves a significant deterrent effect.”

“The more actions like this we do, hopefully the fewer we’ll have to do in the future,” Winuk said, “because people know there is an entity out there who will take action against them if they engage in that activity.”

Winuk used the announcement Friday to tout two bills his agency is pushing to require more disclosure of political contributions, and said Senate Bill 27 and Assembly Bill 800 are expected to get floor votes in the coming week.

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