Three Republican central committees in California have agreed to pay fines for laundering money during the 2010 election, the Fair Political Practices Commission announced Monday.
The state’s political watchdog has proposed fines of $5,000 each for the Yolo County and Santa Clara County Republican central committees for failing to report their role as intermediaries to funnel money from Ann and Charles Johnson – an owner of the San Francisco Giants – to Damon Dunn, the Republican candidate for secretary of state in 2010.
The FPPC also proposed a $15,000 fine for the Republican Central Committee of Los Angeles County for acting as an intermediary in sending money from Paul Anthony Novelly – chief executive of Apex Oil in St. Louis – and his family to a 2010 Republican candidate for California Senate, Rabbi Nachum Shifren.
In all three cases, according to the FPPC, the donors had given the maximum allowable contributions to the candidates they supported, but wanted to contribute more. So they worked with campaign consultants to contribute money to the central committees, which in turn donated almost the same amounts to the candidates, the FPPC documents say.
That violates state law because donations to political parties are not supposed to be earmarked for specific candidates. The FPPC has found similar violations in the past involving Republican central committees moving money to support state Sens. Tom Berryhill and Joel Anderson. It’s a pattern that likely results from limits California voters put on campaign fundraising when they approved Proposition 34 in 2000. That measure limits the amount donors can contribute to specific candidates, but allows unlimited donations to political parties – as long as they are not designated for specific candidates.
In the cases involving Dunn, the secretary of state candidate, the FPPC found that Dunn’s political consultant Matt Rexroad and political fundraiser Michael Sowers played key roles in orchestrating the contributions from the Johnsons to the central committees, and then on to the Dunn campaign.
The FPPC reviewed emails, text messages and phone records that show how the two men coordinated the plan: Sowers asked the Johnsons’ adult daughter to support Dunn by contributing to the central committees, and Rexroad communicated with the central committees to ask that the money come back to his client. Rexroad sent an employee to pick up the checks from Johnson’s San Mateo office and deliver them to the central committees, an FPPC documents says, and sent an email to the central committees chairmen with instructions on wiring the money to the Dunn campaign.
The Johnsons ended up giving $34,000 to each central committee. The Santa Clara committee later gave $33,000 to Dunn’s campaign and the Yolo committee gave about $32,300. A third committee that is not being fined by the FPPC – the Placer County Republican Central Committee – also received a donation from the Johnsons that the FPPC says was targeted to support Dunn. The Placer County group refunded the Johnsons’ money, “calling the transaction ‘tainted,’ ” according to an FPPC document.
In an interview Monday, Rexroad said he did nothing wrong by asking the central committees to support his candidate.
“You can ask and request, but in the end they get to decide,” he said. “The central committees chose to give out of their own volition. They could have chosen to give to any candidate they wanted to it was entirely within their control.”
Spokesmen for the Santa Clara and Yolo committees said their organizations agreed to pay fines for not properly reporting their roles as intermediaries, and were frustrated that the FPPC agenda lists them under the heading of “money laundering.”
“The only violation for Santa Clara County is not filling out the form right. That’s the only violation we’ve got,” said spokesman Hector Barajas.
Mark Pruner, chairman of the Yolo County committee, said “this was a reporting error. That’s really what it was. And that’s the section we were charged under.”
In the case involving Shifren, a 2010 candidate for state Senate who is known as “the surfing rabbi,” the FPPC found that oil executive Novelly – along with his son, daughter and son-in-law – gave a combined $39,000 to the Republican Central Committee of Los Angeles County, of which $32,400 was then passed on to Shifren’s campaign.
Novelly had pledged that his family would give Shifren $50,000, the FPPC documents say, and along with his wife contributed $7,800 directly to his campaign. He tasked his son Jared with making arrangements for the remainder. Emails disclosed by the FPPC show Jared Novelly looking for a way around California’s contribution limits:
“With the large percentage of campaign contributions that you have already received from my parents, I feel it may be best to have the rest of the contributions come from sources other than Missouri and Florida residents with the last name of Novelly,” Jared Novelly wrote in a June 2010 email to Shifren.
“Are there any political action committees that you have had discussions with who may be interested in contributing if they received other monies? Not sure of campaign finance laws in CA, but if we could find these other groups, it would look better for both your campaign and our private sensibilities.”
The Novelly family decided against setting up an independent expenditure for Shifren and, working with Shifren’s campaign staff, instead gave the money to the Republican central committee for the purpose of supporting his campaign, the FPPC documents say.
The FPPC meets Oct. 16 to vote on the proposed penalties.
Editor’s note: This post was updated at 3:19 p.m. with a response from Matt Rexroad. The post was updated at 4:50 p.m. to say the committees agreed to pay fines for money laundering. Earlier versions said they admitted money laundering, but in fact they agreed to pay the fine without admitting guilt.