LEGAL NEWSLINE

SACRAMENTO, Calif. (Legal Newsline) -- California Attorney General Kamala Harris announced Thursday her office and the state's Fair Political Practices Commission have secured a $1 million civil settlement against two out-of-state organizations for campaign finance violations.

Under the terms of the settlement, the Arizona-based Center to Protect Patient Rights and Arizona-based Americans for Responsible Leadership have admitted to making millions of dollars in unlawful intermediary contributions in connection with the November 2012 election in California and have agreed to each pay a fine of $500,000.

Harris said the case demonstrates that the state's campaign finance laws are in "desperate need" of reform.

"California law currently contains a loophole for certain groups to evade transparency by maintaining the anonymity of their donors," the attorney general said in a statement. "I fully endorse swift legislative action to change the law."

According to Harris' office, in October 2012, $11 million was funneled to a campaign committee supporting Proposition 32, a statute that would have affected political contributions via payroll deductions and contributions to political candidates, and opposing Proposition 30, a measure to increase taxes to help preserve education funding in the state.

Proposition 32 was defeated by voters in the state's November 2012 election. Proposition 30 was approved.

A civil investigation was initiated by the FPPC, which was represented by the California Department of Justice's Civil Law Division.

Following the election, the DOJ's Criminal Law Division opened an investigation to examine potential criminal wrongdoing.

The investigation revealed that a Virginia nonprofit, Americans for Job Security, raised about $28 million in 2012 for issue advocacy opposing tax increases and supporting "pro-paycheck public policy."

Current state law allows donors to remain anonymous if their contributions are used for issue advocacy.

Shortly before the general election, AJS decided that were it to spend the money on issue advocacy at that time, it would trigger a California law requiring disclosure of the funds' sources.

Instead, AJS decided to make multiple donations to another non-profit, CPPR, which has a history of funneling millions of dollars to support conservative causes, Harris' office noted.

According to the Attorney General's Office, AJS "expected and hoped" that CPPR would be able to find other money to support AJS' efforts in California.

AJS gave CPPR a donation of $4.05 million on Sept. 10, 2012, $14 million on Oct. 11, 2012 and $6.5 million on Oct. 19, 2012.

Following these donations, CPPR made two major contributions of its own. First, on Sept. 11, 2012, CPPR donated $7 million to the Iowa-based American Future Fund. As an intermediary, AFF then made a contribution of $4.08 million to a third entity, the California Future Fund.

CFF used that money to support Proposition 32 in the California general election.

According to Harris' office, CPPR's second contribution occurred on Oct. 12, 2012 in the form of $13 million to ARL. As an intermediary, ARL returned $11 million to California through a contribution to the Small Business Action Committee, a campaign committee supporting Proposition 32 and opposing Proposition 30.

CPPR's contributions were funneled back to California campaign committees through intermediaries AFF and ARL, which violated civil provisions of the California Political Reform Act.

Harris noted that the DOJ's investigation did not reveal evidence to prove a "knowing or willful" violation of the law by these parties. As a result, Attorney General's Office has concluded its investigation and said it will not pursue criminal charges.

California Labor Federation Executive Secretary-Treasurer Art Pulaski said in a statement Thursday that the settlement sends a "strong message" to "shadowy" special interest groups.

"We applaud Fair Political Practices Commission Chair Ann Ravel for aggressively pursuing this investigation and holding these out-of-state dark-money groups accountable for violating California law," he said. "When out-of-state special interest groups threaten the integrity of our elections, they must be brought to justice.

"In this case, these secret groups laundered money through a maze of political action committees with the goal of passing Proposition 32, a pernicious measure to silence the voices of California workers.

"Ultimately, voters saw through the facade and defeated Proposition 32 by a wide margin."

Had the groups not been held accountable, Pulaski said the state would "surely" see more efforts of the like in the future.

"Fortunately, the FPPC said today, in no uncertain terms, that this sort of activity will not be tolerated here," he said. "It's a good day for democracy in California."

For a copy of the settlement document, click here.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.