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Political regulators close loophole in legal defense funds

By Jim Sanders - jsanders@sacbee.com
Published 2:39 pm PST Wednesday, November 14, 2007

Regulators of California's political practices voted Wednesday to close a loophole that has allowed legal defense funds to be used on Hawaii restaurant tabs and on fundraising ranging from a day-spa pampering to golfing at luxury courses.

The Fair Political Practices Commission unanimously approved regulations to toughen reporting and spending requirements, including a mandate that candidates and elected officials disclose why they need a legal defense fund and allow it to be used only for attorneys' fees and legal costs -- not fundraising, advertising, political consultants, payment of fines, or reimbursement to campaign committees.

In April, The Bee reported that nearly a dozen former or current politicians -- from Senate President Pro Tem Don Perata to former Secretary of State Kevin Shelley -- had created legal defense funds that potentially could be used to sidestep the state's campaign contribution limits.

One lawmaker, Sen. Ron Calderon, D-Montebello, had used his legal defense fund to raise more than $150,000 after his legal issue was resolved. Nearly half the money raised for his legal defense went toward "fundraising" expenses at lavish venues -- a Lake Tahoe day spa, two Hawaiian restaurants and one of the Pacific Northwest's premier golf courses, Bandon Dunes, in Oregon. Calderon also spent $7,092 on a chartered flight from Sacramento to Oregon, records showed.

Calderon, chairman of the Senate Elections Committee, said he initially opened a legal defense fund in response to an election challenge during his June 2006 Senate primary race against former Democratic Assemblyman Rudy Bermudez of Norwalk. Bermudez, who initially sought a recount after Calderon won by a few hundred votes, ultimately threw in the towel and conceded defeat about a month later.

Calderon said his legal bills started to pour in after the election dispute had been settled.

Fundraising costs were high because he had to raise a lot of money quickly, Calderon said in a written statement in April.

"This, coupled with the fact that I had maxed out with just about every possible donor in my database during my Senate campaign, made it necessary to hold more attractive and costly events to attract new donors quickly," he wrote.

Calderon's use of legal defense funds for out-of-state fundraising expenses did not spawn formal complaints or accusations of wrongdoing, but the practice would not be allowed under the FPPC regulations approved Wednesday.

The new standards, adopted 5-0, also prohibit use of legal defense funds for costs related to a recount election, mandate better record-keeping for audits, and require donors to be reimbursed on a pro rata basis if the solicited sums exceed expenses by more than $5,000.

Calderon, who is terminating his legal defense fund, said he does not object to the FPPC standards adopted Wednesday.

But legislators might find it harder to solicit adequate defense funds in the future, he said, because the new rules do not allow dinner, entertainment or other fundraising events.

Calderon said Wednesday's vote provides important clarification nonetheless.

"Prior to that, it really wasn't clear what the rules were, and how you could raise (defense funds), and how you could spend it," he said. "I was just following the letter of the law."


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