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Washington, Sacto Want End to Dark Money

by Larry Bush on 05/10/2013

in Paper Trails

It’s an age-old cry from unions facing management demands for cost-cutting measures that hit workers in the paycheck: “Open The Books.”

Or, as Ronald Reagan said of the Russians, “Trust but Verify.”

In either case, the goal was the same: finding a way to a level playing field that didn’t leave one side vulnerable to the manipulations and misrepresentations of a more powerful party.

Now that demand has spread to politics in new ways in Washington and in Sacramento.

SEC: Let Shareholders See Contributions

In Washington the Securities and Exchange Commission has received some 500,000 comments on the proposal to require publicly traded companies to inform shareholders how much they are spending on political campaigns and where it is being spent.

Such a rule would impact San Francisco politics even though the city bans contributions from corporations because the disclosure rule includes money given to third party groups who then pass it into political channels. Currently if the XYZ Company gives to the Chamber of Commerce that in turn spends the money on a measure to support, for example, 8 Washington, that information is hidden from stockholders as well as the public.

One measure of the value business places on keeping secret this flow of money comes from the over-wrought efforts of major business associations that would suddenly become transparent as pass-throughs by some companies.

So fearful are they that House Republicans have introduced legislation to make it illegal for the SEC to adopt any political disclosure regulations applying to companies under its jurisdiction, according to a recent New York Times report.

The nation’s most powerful business groups – the U.S. Chamber of Commerce, the National Association of Manufacturers and the Business Roundtable – signed a joint letter to Fortune 200 companies urging them to oppose even proxy resolutions by their own stockholders that would create more disclosures, according to the same New York Times article.

Support for the proposed disclosure rule comes from the California Public Employees Retirement System (Calpers). The position of the San Francisco Retirement Board is unknown.

“Tax-exempt groups and trade associations spent hundreds of millions of dollars on political advertising during 2012 elections, but they are not required to disclose their donors. Evidence has mounted that a significant portion of the money came from companies seeking to intervene in campaigns without fear of offending their customers, their shareholders — or the lawmakers they target for defeat,” wrote The Times.

The outcome at this point seems to favor disclosure.

California Disclose Act

Meanwhile some of the disclosure efforts that failed to win support in Washington are poised to be passed at the state level as the legislature moves a half dozen measures through committees and on for a full vote.

A statewide effort with a broad coalition of support is behind the California Disclose Act (SB52) coauthored by San Francisco’s Senator Mark Leno.

It has the support of cities and officials around the state as well as many organizations. Locally letters of support have come from City Attorney Dennis Herrera, AB52 California Disclose Act (Leno).

San Francisco officials who have endorsed it include City Attorney Dennis Herrera and Board members John Avalos, Malia Cohen, David Campos, Jane Kim, Eric Mar and Scott Wiener. So far it has not been endorsed by Mayor Ed Lee and the City of San Francisco is not listed as a supporter. The city’s endorsement usually originates from the mayor.

The Disclose Act is aimed directly at providing voters information on political ads. It includes provisions requiring the three largest funders to be clearly identified on the ads themselves, it applies to all forms of advertising including websites and slate mailers, applies in independent expenditure efforts for or against candidates, and requires candidates to adopt the same standard as federal candidates by saying “I approve this ad.”

The Disclose Act also requires identifying the major donors even when the funding is passed through a third party such as a business association.

FPPC: Pass These Bills!

The Fair Political Practices Commission voted to endorse several pending measures and to offer its support to several more. This pro-active stance by the FPPC stands in sharp contrast to the San Francisco Ethics Commission which consistently fails to inform the San Francisco public of any changes in state law that affect local donors and campaigns or that increase public disclosures. The local Ethics Commission also does not track proposals underway at San Francisco City Hall.

The measures again focus on bringing into the sunlight the flow of money through “dark” channels that allow the donor to be hidden from the public. Such channels include nonprofits, business associations and even entities invented for a campaign.

In one of the more pro-active steps, AB45 authorizes the FPPC to seek an injunction to prevent a violation of the Act or compel compliance with the Act. It also allows the FPPC to perform an audit before a report is required to be filed and would authorize a person to challenge an audit by seeking a writ of mandate. This would close an unnecessarily long gap that exists in current law, when the last campaign report is filed just a few days before an election and then not again for almost three months – long after the election is over, certified and the winner sworn into office. An audit during this period could reveal irregularities that would be important in determining the actual outcome of an election.

Other measures include SB 27 by the chair of the Senate Elections Commission. In the view of the FPPC, this measure 27 “will result in more timely and accurate disclosure of the identity of the actual source of funds being spent on California elections, rather than just the name of a multipurpose organization which often provides little, and sometimes misleading, information about the interest behind the expenditure.  This bill is important because it would increase accountability for those who attempt to avoid disclosure of their identities by channeling funds used to influence California elections through other committees or nonprofits.  By establishing specific rebuttable presumptions that donors have reason to know their donations may be used for contributions or expenditures in California elections, this bill would increase disclosure of important information regarding the true source of the money and the true interest behind it.”

AB 914 deals with the loophole that allows nonprofits to be vehicles for campaign donors who want to remain hidden from the public. In the FPPC analysis, this bill provides “much needed disclosure that in some cases can be nonexistent. Since the Supreme Court decided Citizens United in 2010, there has been an unprecedented amount of campaign activity conducted by nonprofit organizations. Many of these organizations receive large sums of money from individuals and corporations and, under Federal law, are not required to disclose their donors. In the last election, a nonprofit organization contributed a large sum of money, which it apparently obtained from a number of other nonprofit organizations, to a committee in California prior to the election for use on ballot measure campaigns. Only the nonprofit in California was disclosed as the source of the funds. The FPPC brought legal action against them seeking to obtain the true source of the funds. This occurred just a few days before the election. This legislation would simply require nonprofits to know who their donors are and to disclose who is actually funding their campaign activities. This basic disclosure also would provide the public and other government agencies with valuable information regarding the amount of campaign activity conducted by the nonprofit in relation to its activities as whole.”

Another measure deals more directly with candidates and in particular a new definition of a candidate-controlled committee that will capture more ways in which elected officials coordinate political donations and spending.

According to the FPPC, “this bill is important because it would facilitate the Commission’s ability to identify if and when a candidate is influencing a committee. Due to contribution limits, more and more campaign activity is being done through independent expenditure committees. This becomes a problem when candidates coordinate with these committees to effectively circumvent contribution limits and create an uneven campaign playing field. This bill puts into place common sense presumptions of coordination that will assist with enforcement, while allowing for facts to be presented in rebuttal to the presumption that show lack of coordination.

“This bill would establish a presumption that a committee is significantly influenced by a candidate, and thus a “controlled committee”, if the candidate is a voting member of the committee’s governing body, the candidate or his or her agent is involved in the decision-making of the committee or the development or implementation of the committee’s campaign strategy the candidate or his or her agent is involved in directing, planning, or implementing the committee’s fundraising activities in a greater capacity than making endorsements or appearing at fundraisers, or the candidate, or his or her agent, is substantially involved in directing the day to day operations of the committee.”

Where this might come into play in San Francisco would be those cases where a candidate’s campaign manager or attorney doubles by playing a major role in another campaign – either for another candidate or a ballot measure. This has been a live issue in past San Francisco elections.

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