Koch Brothers-Linked Donors Pay $1 Million Campaign Fine

Two Arizona-based political organizations agreed to pay $1 million to settle claims they violated California’s campaign-finance laws when they donated $15 million to conservative causes in the 2012 election.

The two groups “operated as part of the ‘Koch Brothers’ Network’ of dark money political nonprofit corporations,” the state’s Fair Political Practices Commission said yesterday in a statement.

The Center to Protect Patient Rights and Americans for Responsible Leadership, both based in Phoenix, admitted to making unlawful intermediary contributions, California Attorney General Kamala Harris said in a separate statement. There was no evidence of knowing or willful illegal acts and the state won’t pursue criminal charges, Harris said.

The Center to Protect Patient Rights is led by Sean Noble, a Republican consultant with ties to billionaire energy executives Charles and David Koch. The group received about $25 million last year from Americans for Job Security, a Virginia-based nonprofit opposed to tax increases, according to Harris’s statement. CPPR in turn funneled the money through ARL and other intermediaries to two California campaign committees, Harris said.

‘Desperate Need’

“This case demonstrates in clear terms that California’s campaign finance laws are in desperate need of reform,” Harris said in the statement. “California law currently contains a loophole for certain groups to evade transparency by maintaining the anonymity of their donors.”

The donations went to a campaign supporting an unsuccessful California ballot measure that would have prohibited the use of union payroll deductions for political purposes. The money also went to a campaign opposed to a successful ballot measure to temporarily raise income taxes for Californians making more than $250,000 a year to increase education funding.

The state commission last year sued CPPR to identify the undisclosed source of an $11 million donation, which was one of the largest in last year’s election, after the group refused to comply with an audit to determine whether it violated laws aimed at letting voters know who is bankrolling ballot initiatives.

CPPR made a separate $4 million donation to a California campaign through intermediaries, according to Harris’s statement.

Unintentional, Inadvertent

“The commission today recognized that CPPR acted in good faith and that there was absolutely no intent to violate campaign reporting rules,” Malcolm Segal, the group’s lawyer, said yesterday in an e-mailed statement. “The California attorney general conducted a complete and thorough investigation and agreed that the conduct was unintentional and inadvertent.”

Kirk Adams, president of ARL, said in a phone interview that he felt vindicated because last year California officials had accused the organization of money laundering and threated it with as much as $33 million in fines.

“This was an inadvertent violation made in good faith,” Adams said.

Noble, formerly the chief of staff for Representative John Shadegg, an Arizona Republican, spoke in 2010 at a Koch-sponsored gathering of wealthy donors where they discussed how to help Republicans win the White House and more seats in Congress. He shared a podium with Tim Phillips, president of the Koch brothers’ nonprofit Americans for Prosperity. The CPPR gave AFP $1.9 million in 2010.

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

Before it's here, it's on the Bloomberg Terminal.