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Arizona Nonprofit Must Reveal $11 Million Donor Details

A nonprofit group that contributed $11 million to fight a California ballot measure aimed at raising taxes was ordered by a judge to disclose documents so state election officials can probe where the money came from.

State court Judge Shelleyanne W.L. Chang in Sacramento, California, yesterday issued a ruling siding with the Fair Political Practices Commission that had argued that an audit of records from the Arizona nonprofit, Americans for Responsible Leadership, related to the contribution was needed before the Nov. 6 general election.

“The FPPC is not seeking to restrict, and the court is not, limiting expenditures by the ARL,” Chang said in a minute order posted on the court’s website. “The court is simply concluding that the FPPC, under its statutory authority can conduct an audit to determine whether it has complied with applicable California law and regulations.”

The FPPC sued Phoenix-based Americans for Responsible Leadership to identify the secret source of the donation after the group refused to comply with a commission audit to determine whether it violated laws aimed at letting voters know who is bankrolling ballot initiatives.

The donation, one of the single largest contributions made in California this election, also supports a proposition to prohibit unions from using payroll deductions for political purposes.

Supreme Court

The funding is part of a wave of secret money flowing through nonprofit groups that are increasingly being used to protect the identities of donors in the aftermath of the U.S. Supreme Court’s 2010 decision in a case called Citizens United v. Federal Election Commission and other court rulings.

Out-of-state-groups spending money on California ballot initiatives must disclose their donors before Election Day if the donors intend for their contributions to be used to back or oppose candidates or measures, Gary Winuk, chief of enforcement at the commission, said in a petition seeking a court order against Americans for Responsible Leadership.

“Because the records sought by petitioner may be highly relevant to the upcoming election, it is imperative that respondent be ordered to produce the records immediately in order to avoid irreparable harm to petitioner and the voters of California,” Winuk said in a court filing.

The Phoenix group said in a filing that the Citizens United ruling protects the constitutional rights of people who “associate together in nonprofit corporations.” The ruling gave corporations the same rights as individuals to spend money independently to support candidates.

Nonprofit Rights

“What is worth noting here, in light of the political atmosphere that has led to this case, is the undisputable notion that nonprofit corporations have constitutional rights,” Alexander Vogel, a Washington attorney representing Americans for Responsible Leadership, said in a court filing.

The group has never solicited “earmarked” donations aimed at specific projects and the California disclosure rule wasn’t triggered because its donors didn’t know the group would be contributing money to the Small Business Action Committee PAC, a California group that opposes Governor Jerry Brown’s Proposition 30, he said.

Vogel didn’t immediately return a call yesterday after regular business hours seeking comment on ruling.

The measure would temporarily boost the state sales tax to 7.5 percent from 7.25 percent and raise the levy on income starting at $250,000 to avoid deep education spending cuts.

Union Dues

The committee also backs Proposition 32, a measure that would restrict the use of union dues for political purposes.

Brown, speaking at a rally for Proposition 30 at California State University, Los Angeles, said the opposition is funded largely by “financiers” trying to protect their interests. At the same time, Brown said, more billionaires support Prop. 30 than oppose it.

Brown said the money is coming from a few people in Arizona.

“They may be good people, they may be bad, but whoever they are, they’re ashamed of their identities,” Brown said. “They don’t want to be known.”

Americans for Responsible Leadership seeks to educate the public about “concepts that advance government accountability, transparency, ethics and related public policy issues,” according to its website. The group never made contributions in California before Oct. 15, when it gave $11 million to the Small Business Action Committee PAC, state officials said in a court filing.

The case is Fair Political Practices Commission v, Americans for Responsible Leadership, 34-2012-00131550, California Superior Court, Sacramento County (Sacramento).

To contact the reporters on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net; Edvard Pettersson in Los Angeles at epettersson@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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