Much-Ballyhooed Political Penalties Probably Won't be Collected

Thursday, January 23, 2014

When the state Fair Political Practices Commission (FPPC) announced record fines last October for two members of “the Koch brothers network of dark money political nonprofit corporations,” then FPPC Chair Ann Ravel touted the punishment as a victory for electoral transparency.

However, along with observers being able to see how millions of dollars can easily and anonymously be slipped into the political process, they also saw the shortcomings of the laws that govern it.

Last week, the Los Angeles Times reported that the campaign groups have not paid the total of $15 million they were penalized for trying to illegally influence the November 2012 California election and there are no indications they ever will.

American Future Fund and Small Business Action Committee took $15 million from two Arizona non-profit organizations and spent it in a convoluted plan that targeted Governor Jerry Brown's Proposition 30 tax hike for defeat and supported the anti-union Proposition 32. They were caught and ordered to pay penalties, which equaled the money the accepted.

The money that made its way into the California election in its waning days originated with the Center to Protect Patients Rights (CPPR), a group identified by the FPPC as being the key nonprofit in the Koch Brothers’ political network. CPPR gave money to American Future Fund, which channeled $4.08 million to California Future Fund for Free Markets, and Phoenix-based Americans for Responsible Leadership (ARL), which gave $11 million to the Laguna Nigel-based Small Business Action Committee.

The Washington Post and the Center for Responsive Politics used tax returns to calculate that the network of 17 groups run by billionaire brothers David and Charles Koch distributed $407 million in 2012, far more than any other organization, including the $325 million Karl Rove’s two Crossroads organizations. All of organized labor combined contributed around $400 million to local, state and federal campaigns.

But the Koch money, as large as it is, does not include complete revenues from eight groups that still haven’t filed tax returns for a portion of 2012.  

Three-fourths of the Koch $407 million was funneled through a group called Freedom Partners, which in turn moved most of its money through the Center to Protect Patient Rights. It is unknown how much of the Koch money actually comes from the brothers. It flows from multiple sources that are largely untraceable, thanks to U.S. election laws and the U.S. Supreme Court's 2010 Citizens United decision that unleashed virtually uncontrolled financing of political campaigns.

The two groups that owe California money have indicated an unwillingness or inability to pay. The Small Business Action Committee, initially said the group wouldn’t pay its $11 million penalty because the law applies only to candidate elections and not ballot initiatives and the organization hasn’t been found in violation of any campaign finance laws. Oh, and they spent all the money on the election. Discussions with the state are still ongoing.

The California Future Fund for Free Markets, which owes $4 million, has disbanded. The Center to Protect Patient Rights and Americans for Responsible Leadership paid a total of $1 million in fines.

–Ken Broder


To Learn More:   

Two Groups that Used Secret Political Donations Haven't Paid Penalties (by Chris Megerian, Los Angeles Times)

Koch-Backed Political Coalition, Designed to Shield Donors, Raised $400 Million in 2012 (by Matea Gold, Washington Post)

Record FPPC Penalties and Shoddy Redacting Inconvenience Mystery Election Donors Linked to Koch Brothers (by Ken Broder, AllGov California)

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