THE RECALL CAMPAIGN

Conflicting Laws Mask GOP Donors

By Filing with a Federal Agency, a Political Group Avoids State Rules

By Jeffrey L. Rabin,
Times Staff Writer

October 6, 2003

The Republican Governors Assn. is using the conflict between state and federal campaign finance laws to avoid releasing the identities of donors behind $1 million in television ads attacking Gov. Gray Davis and Lt. Gov. Cruz Bustamante in the final days of the recall campaign.

One of the ads likens Bustamante to Davis. Another mocks Bustamante's "Tough Love" proposal to raise income taxes on the wealthiest Californians to help balance the state budget.

The Democratic Governors' Assn. has also played a role in the recall campaign, giving $550,000 to Davis as he attempts to hold onto his job in Tuesday's election. In partial filings with state officials and in an interview with The Times, that group said much of its donation came from labor unions, including some that have recently concluded negotiations with the Davis administration.

At the heart of the matter are the rules over the disclosure of political donations.

The Republican Governors Assn. filed an independent expenditure report with the state Sept. 26, disclosing that $1 million had been spent on anti-Bustamante television ads.

State rules for such filings state that contributions of $100 or more must be disclosed, listing the name and address of the contributor, his or her occupation and employer, and the date and amount of the contribution.

But the identities of the association's most recent donors were not disclosed and will not be known until after the election.

That is because the Republican Governors Assn., like many other political groups, reorganized as a "527" entity, so named because they are governed by Section 527 of the Internal Revenue Service code. As such, said GOP governors spokesman Harvey Valentine, the association files monthly reports on contributions and expenditures with the Internal Revenue Service, not with the secretary of state's office.

For strategic reasons, Valentine said, association officials would not disclose information on the group's most recent donors or the balance in its campaign fund. Valentine insisted that the association had complied with the rules in California and would file its report on September donations after Tuesday's election.

"This money is money from our members. It will be disclosed," Valentine said. The association's report on September receipts and expenditures must be filed with the IRS by Oct. 20.

Doug Stone, a spokesman for the secretary of state's office, said that "it would appear that contributions of $100 or more should have been disclosed on this filing."

Paul Sanford, general counsel of the Center for Responsive Politics, a watchdog group in Washington, criticized the failure to disclose the sources of the money to buy the negative ads.

"The people of California are entitled to know where it's coming from and where it's being spent in a very hotly contested election," he said.

According to public filings, the GOP group has raised more than $10 million this year from corporations and individuals. Major donors include firms in the high-tech, insurance, telecommunications, energy, pharmaceutical, defense and transportation industries. Tobacco firms, operators of nursing homes and the National Rifle Assn. have also contributed. Records filed with the IRS show that contributors include:

• Archer Daniels Midland Co., a maker of ethanol, which gave $100,000 in February. Davis has clashed with the Bush administration over use of ethanol as a replacement for MTBE -- a chemical added to gasoline -- that is polluting California waters.

• The Williams Cos. of Tulsa, Okla., which donated $25,000. California Atty. Gen. Bill Lockyer agreed last November to drop the state's lawsuit that alleged the energy company engaged in price gouging during the 2001 power crisis. As part of the settlement, Williams agreed to cut the price it would charge the state for power under long-term contracts negotiated with the Davis administration during the crisis.

As for the Democratic Governors' Assn., filings with the California secretary of state show that the first $250,000 it gave to the group Californians Against the Costly Recall of the Governor came entirely from labor unions.

Records show that the American Federation of State, County and Municipal Employees union gave $150,000 to the Democratic Governors' Assn. on Aug. 21, one week after Davis' office announced that the state had reached agreement on a new contract with the union.

The same day, the Service Employees International Union contributed $50,000 to the association. A short time later, the Davis administration reached agreement on contract terms with the California State Employees Assn., the largest union of state workers. The association is an affiliate of SEIU.

Both unions have also contributed directly to the governor's anti-recall campaign. Davis officials say there is no connection between the contributions and the agreements reached with state employee unions.

Additionally, the International Brotherhood of Electrical Workers donated $40,000, and the United Food & Commercial Workers Union gave $10,000 to the Democratic Governors' Assn.

On Sept. 25, the group sent another $300,000 to back Davis. Though the sources of that contribution have not been filed with the state, Democratic governors spokeswoman Nicole Harburger said the money came from a number of labor unions and companies. According to Harburger, SEIU provided $100,000; the International Assn. of Firefighters gave $50,000; Amgen, a Thousand Oaks biotech company, donated $35,000; Beverly Enterprises, one of the nation's largest nursing home companies, gave $30,000; Level 3 Communications and SBC, the parent company of Pacific Bell, both gave $30,000; and American Specialty Health Plans contributed $25,000.

Times staff writer Joel Rubin contributed to this report.