When state regulators announced last week the largest fine — $1 million — ever levied for a political campaign violation in California, the steep penalty was portrayed as a victory for transparency and a defeat for so-called "dark money" groups that keep their donors under wraps. But it wasn't a complete win for those concerned about the influence of money in politics, because the Fair Political Practices Commission decided to let the dark money groups' funders off the hook. Moreover, the FPPC's decision raises questions of favoritism, because some of the largest donors in the financial scheme were longtime contributors to Governor Jerry Brown.
In fact, the single-largest donor was the San Francisco-based Fisher family, which owns the Gap retail empire and is the majority owner of the Oakland A's. Partially redacted documents released by the FPPC show that the Fishers donated at least $9.075 million to a shadowy Virginia-based nonprofit that then funneled millions in cash to California political campaigns as part of a scheme that violated state law.
The Fishers are longtime donors to Governor Brown's political campaigns and to his Oakland charter schools. In addition, the governor's wife, Anne Gust Brown, is a former longtime top executive at the Gap.
Ironically, the scheme in question involved the Fishers secretly funding an unsuccessful attempt to defeat Governor Brown's 2012 tax measure, Proposition 30. Their donations also bankrolled Proposition 32, which sought to weaken the political influence of organized labor in California. Brown, like most Democrats, publicly opposed Prop 32.
FPPC chief investigator Gary Winuk, who spearheaded the case, did not respond to a request for an interview. But in legal documents, Winuk stated that his office concluded that the donors had not violated state laws because they could not have reasonably expected that the money they gave to the Virginia-based group Americans for Job Security would have ended up funding Prop 32 and opposing Prop 30.
However, a longtime state ethics expert questions that conclusion. Robert Stern, who authored California's campaign finance reform law in the 1970s and is a former executive director of the FPPC, called the dark money scheme "a real subterfuge." Stern also contended that evidence in the case indicates that the Fishers and other donors knew "what the money was going to be used for."
Indeed, they must have known. According to the FPPC's investigation, Tony Russo, a longtime California Republican operative who was part of an effort to pass Prop 32 and defeat Prop 30, hatched the funding scheme last year. Russo was working for Americans for Job Security at the time, and he approached the Fishers and other large donors and gave them two options: donate directly to a campaign to pass Prop 32 and defeat Prop 30, or contribute secretly to the Virginia-based nonprofit group. Russo told the donors that if they gave directly to the campaign, then their names and the amounts they contributed would have to be revealed under California's disclosure laws. But if they donated to Americans for Job Security, they could keep their identities secret, because under election laws, nonprofit organizations do not have to reveal their funders.
In the past few years, right-wing groups, led by organizations with ties to the billionaire Koch brothers, have taken advantage of this dark money loophole to secretly fund campaigns throughout the country using nonprofits with innocuous sounding names — mostly in efforts to defeat Democrats and President Obama. In fact, Americans for Job Security is a Republican-leaning nonprofit that is well known in political circles for secretly funding campaigns nationwide.
But in this case, Russo targeted some of Governor Brown's longtime donors — perhaps realizing that they would not want it known publicly that they were funding a campaign that sought to defeat his tax measure and harm organized labor. According to FPPC documents, donors approached by Russo decided to secretly contribute a total of $28.9 million to Americans for Job Security rather than publicly fund the pro-Prop 32 and anti-Prop 30 campaigns. Almost all of the secret donations came from California contributors, with the Fishers topping the list.
Then in September and October 2012, just before last year's election, Russo's group transferred $24.55 million of these secret funds to a second dark money nonprofit, the Center to Protect Patient Rights. This Arizona-based group, which has ties to the Koch brothers, then transferred $18 million to another Arizona nonprofit, Americans for Responsible Leadership. This third group then donated $11 million directly to a pro-Prop 30 and anti-Prop 32 campaign run by Russo.
In the end, the FPPC concluded that the two Arizona groups had violated state campaign disclosure laws and fined them each $500,000. But the FPPC stated the Virginia group and its funders, including the Fishers, did not break the law. (It should be noted that we only know about the Fishers' donations and some others because the FPPC released documents that had the donors' names only partially redacted.)
But the FPPC's legal conclusion is highly questionable. It seems clear the Fishers would not have given more than $9 million to a Virginia nonprofit — unless they knew that at least some of their money was eventually going to come back to California to fund a campaign to pass Prop 32 and defeat Prop 30. As such, they should have disclosed their donations — as required by state law. And the FPPC's decision to effectively exonerate them is troubling, considering their ties to Brown.