California to levy massive fine against Koch brothers groups

October 24, 2013
LEFT - Charles G. Koch - AP RIGHT - David Koch - Bloomberg
Charles G. Koch, left (AP); David Koch (Bloomberg)

Two groups that are part of a conservative political network maintained by billionaire industrialists Charles and David Koch have agreed to a record $1 million civil settlement with the California Fair Political Practices Commission, the largest campaign fine in state history.

The Center to Protect Patient Rights and Americans for Responsible Leadership, two Arizona-based groups that have funneled money to various arms of the Koch operation, will pay the fine for their role in financing ballot initiative campaigns in California in 2012.

The groups sent $11 million to campaigns opposing Proposition 30, which raised the California sales tax and income tax; and supporting Proposition 32, which would have limited political contributions by way of payroll deductions. Proposition 30, which had backing from Gov. Jerry Brown (D), passed. Proposition 32, which took aim at labor unions’ political power, failed.

The FPPC and California Attorney General Kamala Harris (D) filed suit against Americans for Responsible Leadership over the source of the contributions. ARL said the money had come from Americans for Job Security, another Koch brothers operation, and CPPR; ARL then passed the money on to the Small Business Action Committee, a California-based independent expenditure committee.

An investigation found another $4 million contribution from CPPR to another California-based committee. Neither contribution was properly reported, and under state law, the receiving committees will have to turn that cash — more than $15 million in all — over to the California general fund.

“This is a nationwide issue. These groups exploit loopholes in state law to undermine the clear purpose of the law,” Ann Ravel, the chairwoman of the FPPC and an incoming member of the Federal Election Commission, said at a Thursday press conference. “They hid the names of the true donors.”

In a statement, Malcolm Segal, an attorney for the Center to Protect Patient Rights, said the settlement showed the committee never intended to hide information.

“The Commission today recognized that CPPR acted in ‘good faith’ and that there was absolutely no intent to violate campaign reporting rules,” Segal said.

The $1 million fine is the highest levied in FPPC history, and it ranks as the third-highest campaign finance fine ever levied. In 2006, the Federal Election Commission fined Freddie Mac $3.8 million. The following year, the FEC fined the defense contractor MZM Inc. and two lobbyists connected to former Rep. Randy “Duke” Cunningham (R-Calif.) a little more than $1 million.

A spokesman for the two Koch brothers groups didn’t immediately return an email.

Ravel has been working with other states to shine a light on so-called dark — or undisclosed — political money. Earlier this month, the FPPC announced a joint project with about a dozen other state and local governments to share best practices and advocate for transparency in political spending.

Reid Wilson covers state politics and policy for the Washington Post's GovBeat blog. He's a former editor in chief of The Hotline, the premier tip sheet on campaigns and elections, and he's a complete political junkie.
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