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Exclusive: California Grand Jury Probing Shadowy Money Groups

Jul 17, 2013 1:16 PM EDT

A California grand jury has been convened in a probe that began when a PAC didn’t disclose the sources of its spending, as required by California law. Peter Stone reports.

A grand jury is now involved in a high-stakes California probe that is looking into whether a PAC and three so-called dark-money groups—including one with ties to the billionaire brothers Charles and David Koch—broke a campaign disclosure law by funneling $11 million from secret sources to influence ballot initiatives in the state’s 2012 election, The Daily Beast has learned.

The state grand jury, previously unreported, is part of an expanding investigation that’s been spearheaded by the state’s attorney general and the Fair Political Practices Commission (FPPC), according to two people familiar with the probe, who requested anonymity since they weren’t authorized to discuss the ongoing grand jury proceedings, which are secret.

The existence of a grand jury, something typically convened to obtain sworn testimony from witnesses, appears to signal increased prosecutorial interest in the inquiry to uncover the actual donors. Launched last fall, the probe could lead to eight-figure civil penalties and possible criminal charges, according to statements last year from the A.G.’s office and the FPPC, the state’s election watchdog agency.

Neither Lynda Gledhill, a spokeswoman for the attorney general, nor Ann Ravel, the head of the state FPCC, would comment on the probe or the grand jury’s activities.

The inquiry, focused on three out-of-state dark-money groups and a California business PAC, was triggered when the PAC, the Small Business Action Committee, reported in October 2012 spending $11 million on two ballot initiatives—but did not reveal its donors’ names, a legal requirement in the state for contributors to ballot initiatives.

The PAC used the funds in what turned out to be two losing efforts: opposing Proposition 30, a measure supported by Gov. Jerry Brown to temporarily raise the state income tax as well as the person tax for wealthier voters, and supporting Proposition 32, which would have barred unions from using payroll-deducted funds for political spending.

Since the probe’s inception, the FPPC, in tandem with the A.G., has issued subpoenas for documents and financial records to the PAC and the dark-money groups as well as individuals and other groups suspected of involvement in channeling the funds for the ballot drives, according to a person familiar with the inquiry. In recent weeks, the A.G.’s office, which has been ramping up its involvement, sent out another round of subpoenas, according to the same person.

Charles R. Schwab, the chairman of the Charles Schwab Corp., or an entity affiliated with Schwab has received a subpoena, according to a person familiar with the probe. In 2011 Schwab was one of about 30 wealthy donors who was cited in a speech by Charles Koch as having given at least $1 million the prior year to Koch backed conservative projects.

A spokesperson for Schwab declined to comment, as did Jason Torchinsky, a lawyer who has represented the PAC and also the three dark-money groups.

The involvement of a grand jury often indicates that an inquiry is intensifying. Grand juries are commonly used in cases where prosecutors are moving to bring chargesor pressuring targets to cut deals, say white-collar lawyers. It’s not known whether any of the three dark-money groups, the PAC, or others have received target letters, which often signal that charges are in the works.

“The largest contribution ever disclosed as campaign money laundering in California history.”

“The convening of a state grand jury is as serious a step in a state investigation as a federal grand jury is in a federal probe,” white-collar attorney Stan Brand told The Daily Beast. “It’s not a foregone conclusion that someone will be charged, but it indicates a heightened level of prosecutorial interest.”

Brand added that California’s disclosure law for ballot initiatives would trump the IRS rules that allow dark-money groups that have “social welfare” tax status to keep their donors secret.

Other lawyers concur. “The Internal Revenue Code would not prevent California law from requiring disclosure of donors,” said Marc Owens, the former head of the IRS tax-exempt unit and now a partner at Caplin & Drysdale.

If prosecutors do move forward, their investigation could shine light on parts of the burgeoning network of conservative “social welfare” outfits that spent hundreds of millions in the last two elections. Under IRS rules, social-welfare groups can engage in political activities so long as that work is not their primary purpose, a loosely enforced rule often interpreted to mean that 49 percent of a group’s spending can go toward political work.

One of the three groups that allegedly channeled the funds to California was the Arizona-based Center to Protect Patient Rights, founded in 2009 by Koch operative Sean Noble, who has emerged in recent cycles as a big player in conservative political and fundraising circles. Noble has spoken at least twice at the billionaire brothers’ biannual conferences aimed at tapping other wealthy conservatives for their favorite projects, and he has been a key strategist at small Washington meetings with other GOP allied groups such as the Karl Rove-founded American Crossroads.

“Sean is the wizard behind the screen” for the Kochs and their network of wealthy donors, said one GOP operative familiar with Noble’s political work.

In 2010 and 2012, Noble’s Center appeared to act mainly as a cash conduit, shipping millions to allied conservative groups. In the 2010 cycle, for instance, it channeled almost $55 million—a sum almost identical to its revenues—to a couple dozen conservative bastions including Americans for Tax Reform and the American Future Fund, according to the group’s filings with the IRS. Most of that largess went to pay for advertising backing GOP candidates or attacking Democrats.

“We had no involvement whatsoever, financial or otherwise, neither directly nor indirectly, on anything to do with Prop. 30 or Prop. 32,” a spokesman for Koch Industries, Rob Tappan, said in an email. Tappan, however, indicated he spoke only for Koch and not “independent entities,” such as Noble’s Center. Asked if the Kochs had received subpoenas from the grand jury, Tappan said it was company policy not to comment on “the existence or nonexistence of investigations.” Noble did not return phone calls seeking comment.

Koch Industries, a sprawling energy and manufacturing conglomerate, is the country’s second-largest privately held company, with annual sales of about $100 billion and some 70,000 employees.

The circuitous routes apparently used to funnel the $11 million into the state were deemed “the largest contribution ever disclosed as campaign money laundering in California history” by the Fair Political Practices Commission.

But the PAC only disclosed that the funds came from a group in Arizona, Americans for Responsible Leadership, a two-year-old “social welfare” entity that had never before spent funds in California. When the FPPC asked the Arizona group for more information and was rebuffed, the commission went to the California Supreme Court, which ordered the outfit to reveal where it received the funds.

To comply, the Arizona group said the $11 million came initially from another dark-money group, the Virginia-based based Americans for Job Security, which is registered with the IRS as a “business league,” which like social-welfare groups can shield the names of its donors.

Making the money trail even murkier, the Virginia group passed the $11 million along to Noble’s Center to Protect Patient Rights which, in turn handed it over to Americans for Responsible Leadership. (Notably, Noble’s Center donated $4.8 million to Americans for Job Security in a separate 2010 money transfer, according to the center’s IRS filings.)

As the California probe has intensified, it has sparked the hiring of some of Washington’s high-powered election-law specialists. For several months, Jason Torchinsky was representing the PAC and the three dark-money groups, but other lawyers with big-name firms are now involved on behalf of unspecified clients. One firm, not previously reported, is Patton Boggs, whose attorneys include Ben Ginsberg, the famously plugged-in election lawyer for numerous GOP campaigns and committees, and William McGinley; also involved in the case is Wiley Rein, home of Jan Baran who for many years has represented Koch in election-law matters. Both McGinley and Baran declined to discuss their clients or the probe.

The grand jury and the widening California probe has stirred considerable unease among some Koch allies and in certain conservative quarters, according to multiple GOP operatives who asked not to named. “People are very puckered up about it,” said one such operative.

SOURCE

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GOP-Statistic

By: RmuseMay. 3rd, 2013

Politicususa

The concept of America as a representative democracy has worked relatively well for over 2 centuries, and it is ultimately superior to other forms of government that are oppressive and despotic; Americans can thank the Founding Fathers for protecting this country from becoming an authoritarian dictatorship. It is difficult to imagine many Americans agreeing to abandon democracy for another form of government, but there are a frightening number of citizens who hate America’s representative democracy with such passion that they are leaning heavily toward overthrowing the government and installing a fascist dictatorship. The group in question is not an extremist militia organization and they are not  concealing their plans from plain view, and in fact, have begun the transition to fascism from within the conservative movement with full cooperation and assistance from establishment Republicans in Congress and state legislatures around the nation.

The idea that America’s democratic form of government could fall to an authoritarian regime began taking shape shortly after the election of Barack Obama, and after a little over four years of constant propaganda by Republican politicians incensed that their reign came to an end in 2009, almost half of Republicans believe “an armed revolution might be necessary to protect our liberties.” A recent poll reveals that it is worse than it seems because more Republicans believe armed revolution might be necessary to overthrow the legally elected government than believe is not required, and GOP politicians have been hard at work inciting their base and putting the brakes on democracy since January 2009.

On Tuesday, a Fairleigh Dickinson University poll revealed that despotism is rampant among the Republican rank and file who are following the lead of Republicans in Congress who have taken extraordinary steps to bring America’s democracy to a halt through not-so-devious machinations and with stunning impunity. In the Senate, for example, the inordinate use of the filibuster has given minority Republicans control of the upper legislative chamber, and around the nation Republican-controlled states are taking extraordinary steps to bring an end to free and fair elections for non-Republican voters. If Americans are foolish enough to believe the Republican’s use of armed revolution to install a permanent Republican government is predicated on the right to unrestricted firearm possession, democracy is already doomed and all that is left is ceding control of the government to the Koch brothers and their fascist regime.

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Las Vegas Sands Chairman and CEO Sheldon Adelson speaks at a news conference for the Sands Cotai Central in Macau Wednesday, April 12, 2012. (AP Photo/Kin Cheung)

HuffPost

Peter H. Stone

Posted: 06/16/2012 12:24 am Updated: 06/16/2012  2:06 am

WASHINGTON — Casino billionaire Sheldon Adelson, whose net worth makes him one of the world’s richest men, is on a check-writing spree that will soon bring his total political contributions in this election cycle to at least $71 million, according to sources familiar with his spending. That money is spread across the spectrum of GOP super PACs, which are required to disclose donors, and nonprofits, which are not.

Adelson and his wife, Miriam, along with other family donations, have already reached $36 million, including $10 million to the Romney-backing super PAC Restore Our Future that was reported this week. But two GOP fundraisers familiar with his plans say that Adelson has given or pledged at least $35 million more to three conservative nonprofit groups: the Karl Rove-linked Crossroads GPS, another with ties to billionaires Charles and David Koch and a third with links to House Majority Leader Eric Cantor (R-Va.).

Adelson, 78, is a staunch supporter of the Israeli right and a strong foe of American unions. In recent years, Adelson has been a major financier of GOP-allied groups, but has emerged this year as the consummate super donor in the wake of 2010 court rulings that permitted corporations, unions and individuals to supply unlimited amounts of money, sometimes anonymously, to independent groups that can advocate directly for candidates.

Adelson has told friends that he might give as much as $100 million in donations this year in support of GOP candidates and conservative issues. That target now seems easily within reach and could be surpassed, say the two GOP fundraisers with ties to the casino magnate.

Crossroads GPS — founded by GOP consultants Rove and Ed Gillespie in 2010 alongside the super PAC American Crossroads — could wind up as the major recipient of the casino titan’s largess, due to Adelson’s longstanding and close ties to Rove. Crossroads GPS has already received one $10 million cash infusion this cycle from Adelson, who, according to the two GOP fundraisers, recently committed to another donation of the same amount.

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Politico

By KENNETH P.  VOGEL and TARINI PARTI |  6/15/12 4:35 AM EDT

The Koch brothers’ political operation has increasingly come to resemble its  own political party — and later this month in San Diego, it will hold what  amounts to its most ambitious convention to date.

Many of the dozens of rich conservative invitees are expected to write huge  checks to a pool of cash distributed among Koch-approved groups, potentially  boosting the Kochs’ 2012 spending plan beyond their historic $395 million goal. And it’s also a chance for the Kochs to  show off their increasingly robust political machine, including a growing voter  database project called Themis that played a major role in conservatives’ recent efforts in Wisconsin and in which  POLITICO has learned Koch operatives have discussed investing $20 million.

It’s part of an ambitious expansion of the billionaire brothers’ political  operation that includes the recruitment of new donors and fundraisers into their  network by a development team led by summit emcee Kevin Gentry, and their recent  hiring of in-house political operative Marc Short to oversee the spending of  funds raised at the summits.

The expansion is also reflected in Charles and David Kochs’ bid to take over the libertarian Cato Institute as well as  their operations steering cash to groups that aren’t commonly thought of as Koch affiliated. The 60 Plus Association, American Energy  Alliance, American Future Fund, Americans for Limited Government and National  Right to Life have all received funds through the Koch donor network.

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