FPPC: $1 million fine in ‘dark money’ case

California’s  political watchdog has imposed an unprecedented $1 million in fines on two-out-of-state nonprofits that secretly funneled some $15 million into California’s elections last year targeting two hotly controversial ballot initiatives.

Ann Ravel, chair of the Fair Political Practices Commission, announced the high-profile settlement that included the penalties. The case stemmed from so-called “dark money” that poured into the state in the November 2012 elections that backed efforts to block tax hikes in Proposition 30 and curb unions’ ability to raise political cash in Proposition 32.

The two non-profit groups, the Arizona-based Center to Protect Patient Rights and Americans for Responsible Leadership, are among the organizations in a network of nonprofits operated by Charles and David Koch, two billionaire businessmen who have spent millions of dollars nationwide furthering conservative political causes.

From 150 hidden donors, nearly $29 million was contributed to California campaigns in last year’s general election for the purposes of issue advocacy, according to the FPPC. Under state law, those donations would not need to be disclosed if they were for this purpose.

“California law doesn’t provide adequate disclosure of political contributions made through dark money nonprofits,” Ravel said at a press conference on Thursday.  “But California has and will continue to aggressively pursue violations of the current law, as is demonstrated by today’s fine — the highest ever in state history for a campaign case.”

From 150 hidden donors, nearly $29 million was contributed to California campaigns in last year’s general election for the purposes of issue advocacy, according to the FPPC. Under state law, those donations would not need to be disclosed if they were for this purpose.

But some of that money also ended up with a political committee running ads targeting Propositions 30 and 32, a violation of financing rules, according to the FPPC.

In October of last year, $11 million was donated to a campaign against the governor’s initiative to hike the state’s sales tax in Proposition 30 and to support Proposition 32, aimed at weakening labor unions.

The first was $4.08 million to the Iowa-based group California Future Fund (CFF) made through the intermediary American Future Fund (AFF), the second contribution of $11 million was made to SBAC through ARL.

“The day before the election, ARL disclosed that Americans for Job Security (AJS) and CPPR were the source and intermediary, respectively, of the $11 million contribution to the Small Business Action Committee (SBAC), a California independent expenditure committee,” the FPPC said in a press release.

Two major contributions, according to state officials, were not properly reported and are now being penalized.

The first was $4.08 million to the Iowa-based group California Future Fund (CFF) made through the intermediary American Future Fund (AFF), the second contribution of $11 million was made to SBAC through ARL.

The FPPC sent letters to both groups requesting they pay back those contributions, some $15 million, in checks payable to the state’s General Fund by the end of next month.

“We didn’t raise it,” a lawyer for SBAC said. “How can there be a violation when our intermediary told us they weren’t the source of the contribution?”

The attorney went on to say that SBAC no longer has the money that the state is seeking, that those funds were spent on campaigns last year.

“They know that the money is not sitting in the bank account. Not one dime of this money is still in their bank account; it all was spent on Props 30 and 32. They know that, so it makes absolutely no sense,” the lawyer said.

Under federal law, nonprofits in campaign financing would not be required to disclose their contributors but California regulations say this only applies to issue ads, not those contributions going toward a state campaign.

“This case highlights the nationwide scourge of dark money nonprofit networks hiding the identities of their contributors,” said Ravel, who departs Friday for an appointed position by President Obama with the Federal Election Commission.