SAN FRANCISCO
11/05/2012 06:09 pm ET | Updated Nov 06, 2012

California's $11 Million Campaign Donation Source Tied To Koch Brothers, Research Reveals

SAN FRANCISCO -- After a bitterly partisan legal fight, an Arizona-based nonprofit that contributed $11 million to a California pro-business group fighting for conservative causes in this week's election has been forced to reveal its donors.

Americans for Responsible Leadership, which has been pushing a conservative agenda throughout the state during this campaign season, is funded by two secretive nonprofit groups with ties to the politically powerful billionaires David and Charles Koch as well as former Bush administration advisor Karl Rove.

On October 15, the donation of $11 million to the Small Business Action Committee PAC, a conservative group pushing a ballot measure aimed at curtailing the political power of organized labor and fighting another that would hike income taxes on top earners, set off a political firestorm throughout the state. Politicians across California cried foul, demanding the group reveal the sources of its funding.

Following the receipt of a complaint to the California Fair Political Practices Commission, the state's in-house political watchdog attempted to conduct an audit of the donation to investigate accusations of money laundering. When the group refused to reveal the source of its cash, California Attorney General Kamala Harris fought on the commission's behalf.

"I believe this is one of the most important cases we could be dealing with right now; this is about the integrity of the electoral process," Harris told The Huffington Post. "This is so much bigger than the individual initiatives. It's about giving voters the right to know who is influencing an election. Voters need the ability to determine the credibility of the messenger."

On Sunday, the California State Supreme Court unanimously agreed with a lower court that the group did, in fact, have to disclose its donors.

"The court finds that irreparable harm has occurred and continues to occur as each day passes and voters continue to cast their votes without information that may influence their votes," wrote California Superior Court Judge Shellyanne Chang in her ruling.

Lawyers for American for Responsible Leadership had attempted to keep the donors private while the case was kicked up to the U.S. Supreme Court for review. However, the request was rejected by the Golden State's top judicial body, which argued that much of the value of the information obtained though the audit would be lost if it were to come out following the election.

"Disclosure in this highly charged political environment and in the face of an unprecedented and vehemently legally contested investigation is impermissible viewpoint discrimination and plainly violative of ARL's First Amendment rights," Thad Davis, a lawyer for the nonprofit, wrote in a letter to the high court.

The Small Business Action Committee admitted to the state commission that the source of their money was not actually Phoenix-based ARL. Instead, officials acknowledged the group was only acting as an intermediary for the Center to Protect Patient Rights, which in turn was acting as an intermediary for Americans For Job Security.

An investigation by KPCC found that Americans for Job Security, listed as a 501(c)(6) non-profit trade association, shares an office in Alexandria, Va., with Crossroads Media, a company that services Karl Rove's American Crossroads SuperPAC.

Meanwhile, the Center to Protect Patient Rights gave over $55 million to 26 Republican-affiliated groups during the 2010 midterm election cycle alone, focusing on a litany of issues from abortion to homeland security. An investigation by the Los Angeles Times discovered several ties between the Center and the Koch brothers. The group has long been considered by some critics as a pass-through for other individuals and organizations looking to inject money into the political system while keeping their identities hidden.

In this particular instance, Americans for Job Security used the Center to Protect Patient Right to funnel money into California. In the past, the same relationship has worked in the other direction. According to IRS filings, the Center to Protect Patients gave American for Job Security $4.8 million in 2010.

This labyrinthine network of using different, inter-connected groups to funnel money into the political system has become increasingly common in the wake of the U.S. Supreme Court's Citizen's United decision, which opened the door to virtually unlimited campaign contributions by outside groups.

Under IRS rules, Americans for Responsible Leadership isn't required to disclose the identity of its contributors. But money also can't be donated to the nonprofit with the explicit purpose of then being spent on a specific campaign.

"A (c)(4) should not be created to disguise political action," Harris explained. "The law dictates that a donation can be made to a non-profit, but not earmarked to support or oppose a ballot measure."

In addition to forcing the disclosure of its donors, officials have threatened additional action against ARL.

"This isn't going to stop here," Fair Political Practices Commission Chairwoman Ann Ravel told the San Jose Mercury News. "They admitted to money laundering. We agreed to do this without an audit because we wanted to get information to the public before the election. But we in no way agreed this would preclude further action."

The $11 million donation was the largest single donation in California this election cycle and immediately drew the ire of Democratic politicians. Leaders on the left have spent much of the past year pushing Proposition 30, a ballot measure backed by California Governor Jerry Brown that temporarily raises sales taxes and top marginal tax rates to avoid drastic cuts to the state's public education system.

"Someone's been using a phony non-profit in Arizona to funnel money from unnamed donors into our state," wrote Brown in a particularly passionate fundraising letter sent out last week. "Let's not let Arizona bandits steal our democracy."

Calling the governor's attack "politically motivated," Small Business Action Committee spokeswoman Beth Miller defended the donation in an interview with the Sacramento Bee. "Perhaps he doesn't like the fact that we have additional resources to get our message out about why we think that voters should vote 'No' on 30 and 'Yes' on Prop. 32," Miller said. "Pointing the finger and making baseless accusations is not going to further the political debate about whether these measures are worthwhile."

Political consultants told the Sacramento Bee that the $11 million was likely the largest amount ever donated in a statewide contest coming from an unknown source.

Even with the last-minute legal success in discovering the origin of the funds, some election observers still worry about the uncertain future of shining sunlight into the increasingly murky world of campaign finance.

"Lawlessness has won," said Daniel G. Newman, co-founder of campaign finance tracking group MapLight, in a statement. "Despite the outstanding work of Ann Ravel and the founder Political Practices Commission, Americans for Responsible Leadership has succeeded in hiding the true source of their $11 million ballot measure contribution until one day before the election. With laws at stake that could affect all Californians for decades, merely fining these brazen outlaws is not enough. They should serve jail time for subverting California's election process. We need strong criminal laws to make sure that future violators are held responsible."

This sort of 11th-hour influx of a massive amount of campaign cash is known as a "money bomb" and has become increasingly common in recent election cycles.

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