Political aftershocks are still being felt in California, more than a week after Al Jazeera America revealed stunning details about an FBI sting operation at the State Capitol.
According to an FBI affidavit obtained by the network, a federal agent posed as a movie producer and funneled tens of thousands of dollars in alleged bribes to State Senator Ron Calderon. It’s hard, of course, to top the undercover agent pretending to be a producer, but if you keep reading past those unbelievable details, the document Al Jazeera published shows how easy it is to steer around California’s tough campaign finance laws.
Here’s just one example: Calderon allegedly brags to the FBI agent about how the Latino Caucus transferred $25,000 to a nonprofit he and his brother control. The money was allegedly the payoff Calderon received for not challenging Senator Ricardo Lara for caucus chair. At least that’s what the affidavit claims. (Calderon denies the allegations; Lara’s office did not respond to a request for comment.)
Using A Nonprofit To “Pay Ourselves”
According to the nonprofit’s tax filings, Californians For Diversity’s vague goal is to “Educate, inform, support and focus the California voters on the ‘bread and butter’ issues of California.” Ron Calderon told the undercover agent something different. He said the nonprofit was set up so he and his brother, a former legislator, could “pay ourselves” and “make…part of (a) living.”
Kim Alexander, the president of the California Voter Foundation, says the fact Calderon was allegedly steering money to his own supposedly charitable organization illustrates how lawmakers can find their way around disclosure laws and contribution limits. “Money in politics is something like an air bubble underneath a carpet. And if you step on it one place it just pops up somewhere else,” she said.
“Politicians are very good at coming up with creative ways to find avenues for those who want to influence them, to be able to do so.”
The $25,000 transfer illustrates how easy it is to skirt reporting requirements. The money came from a registered Political Action Committee called “Yes We Can.” California rules require the PAC to report every dollar coming in and going out.
But nonprofits have different rules. All we know about Calderon’s group is what it files in its annual IRS report, called a 990. There’s no information about where its money came from. So if a politician is wrongly setting up a nonprofit to serve as a political arm or a slush fund, it’s pretty hard for regulators to find out.
“Laundering” Money Through Nonprofits
“I think anyone who’s using them intentionally to avoid disclosure certainly is avoiding the spirit of what California law is intended to address,” said Gary Winuk, the chief enforcement officer for California’s campaign finance watchdog, the Fair Political Practices Commission.
Winuk declined to comment specifically on the Calderon allegations, but pointed to a different case he spent the last year investigating. Last month the FPPC slapped a record $1 million fine on a network of conservative groups that shifted tens of millions of dollars from nonprofit to nonprofit to nonprofit, all in an effort to avoid reporting who initially contributed the money. The FPPC’s former chair, Ann Ravel, called it “political money laundering.”
The FPPC is pushing for a slate of laws requiring politically active nonprofits to turn over more information about their donors. Those bills haven’t passed yet. They also wouldn’t do much to stop the type of situation the FBI document details, where a politician is using a nonprofit for personal gain.
Kim Alexander floats one possible solution to prevent legislators from building up war chests in nonprofits: limit how much any donor can give to one politician, no matter what fund that money goes into. “So you can ask someone for that money from your campaign committee, or your initiative committee, or your nonprofit, or your inaugural committee,” she said. “But it’s in the asking where you get to the corruption. And so you want to make sure there’s a limit on how much a politician can ask for from one particular source.”
Reforms do tend to pass after scandals happen. But even if there’s a window for reform in the wake of the Calderon scandal, it’s hard to imagine lawmakers approving such tight restrictions.