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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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The Huffington Post | By
Posted: 03/02/12 02:56 PM ET

The Obama campaign has started a petition aimed at forcing Americans for Prosperity, the conservative group backed by billionaires Charles and David Koch, to release its donor lists to the public, proving the group’s claim of running a grassroots-supported organization.

This latest move by the campaign is part of an ongoing battle between the Obama team and the Koch brothers.

In late February an email to Obama supporters described Americans for Prosperity as a “front group” and accused the Koch brothers of making millions by “jacking up prices at the pump.” The email also claimed the Koch brothers have committed $200 million to destroying Obama before the November election.

Phillip Ellender, president of government and public affairs for Koch Industries, responded to the email with a letter addressed to Jim Messina, campaign manager for Obama’s re-election efforts, disputing the accusations.

“We own no gasoline stations and the part of our business you allude to, oil and gas refining, actually lowers the price of gasoline by increasing supply. Either you simply misunderstand the way commodities markets work or you are misleading your supporters and the rest of the American people,” Ellender wrote.

The letter goes on to defend the organization as not being funded exclusively by the Koch brothers. “Rather it has tens of thousands of members and contributors from across the country and from all walks of life,” the letter stated.

As the Washington Post reported on Wednesday, Messina responded directly to Ellender’s letter, in which he scolded the Koch brothers’ companies and organizations.

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2,000 Protesters March On Koch Industries’ D.C. Office

Think Progress Mobile- April 4th, 2011 at 3:03 PM by Alex Seitz-Wald

Though they don’t want you to know about it, the billionaire Koch brothers are bankrolling a massive campaign to roll back progressive achievements, and today, labor, civil rights, and climate activists turned out at dozens of rallies across the country to demonstrate against the Koch’s secretive influence in American politics and to stand up for labor and civil rights.

In Washington, D.C. today an estimated 2,000 protesters marched on Koch Industries’ Washington D.C. offices and attempted to give Charles and David Koch an invitation to come out and speak with the protesters. Not surprisingly, the building’s doors were locked and no one was allowed inside. However, a representative from the real estate company which managed the building told an handful of organizers who attempted to deliver the invitation, “I’d be here with you guys if I wasn’t working right now.” Noting that he works for the building, not Koch, he said, “I don’t want to be here.”

The events were scheduled for today because it marks the 43rd anniversary of the assassination of Dr. Martin Luther King, Jr. in Memphis, TN. King traveled to Memphis to support a strike by the city’s sanitation workers, and was an ardent supporter of workers’ rights. Dr. Earl D. Trent Jr., the senior pastor at the Florida Avenue Baptist Church in Washington, told ThinkProgress that if King “were alive today, he would be right here at the forefront, no doubt.” “And that’s why we have to carry this out.”

Watch ThinkProgress’ video report:

Last Thursday, tea party activists rallied on Capitol Hill to pressure Republican lawmakers to cut government spending. Crowd estimates ranged from “dozens” to “fewer than 200,” yet the event attracted dozens of reporters and significant media interest, producing hundreds of stories in local and national press. At today’s rally, which was ten times bigger than the tea party one, ThinkProgress spotted three reporters — none from mainstream publications.

SOURCE

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Note from Suzie-Q:

This is an older article but relevant to what we are seeing at the gas pumps today and the busting of Unions… And, let’s not forget the Tea Party;  guns, God and gold.

Tea Party movement influenced by corporate oil and Mormon ideology

Examiner- Ron Bynum

January 25th, 2010 11:03 am PT

The Tea Party movement’s supporters think they are a grass roots movement, but their ideology of guns, God and gold reeks of the Mormon (LDS) philosophy, and they receive support from big oil in the form of the Koch brothers, owners of the nation’s largest private energy company.

At the Tea Partier’s rallies, there are many placards and signs citing their trust in guns, God, and gold, a mantra that Glen Beck of Fox News uses, and it appears that Beck, a Mormon (convert in 1999), is proselytizing his faith when he uses that phrase.

The brothers Charles and David Koch, of Koch Industries, are major contributors to the Heritage Foundation, the Competitive Enterprise Institute, and the Cato Institute, and are a major funding source for lobbying groups that deny climate change, and spent more than $8.5 million to stop “cap and trade” because it will cost them big profits. That is the real motivation behind the Tea Party movement, and healthcare reform is a scare tactic and rallying cry to upset ignorant followers and divide the country.

In Modesto, supporters of the Tea Party movement are clueless about the source of their alleged grass roots movement, and believe their liberties are at risk. Many protestors at rallies in the park proclaimed the government would take their guns, restrict their religious freedoms, and increase their taxes. The local gun club posted signs that “Obama’s going to take all your guns away so get them now and don’t register them.”

Religious fanatics claim liberals want to take God out of government and schools, even though God is not allowed in government or schools. Tea Party supporters fervently believe the lies ultra-conservative fear mongers like Sarah Palin and Fox News’ commentators spread, and neo-cons incite Tea Party protestors who remain ignorant of the origins, money, and real brains driving their movement.

It is sad that ignorant, frightened people believe their freedoms are at risk from the legally elected government of the United States. It is also sad these folks who think they are defenders of liberty are really shills for energy companies who will not share their ill-gotten profits with the Tea Party people.

David Koch proclaimed at one event that they are “fighting for the economic freedoms that made our nation the most prosperous society in history.” Koch’s only concern is higher profits earned on the backs of the Tea Party people, and they happily bend over for the shaft as Koch goes to the bank.

In Modesto and around the country, when Tea Party protestors make statements to the media and interviewers, they claim they fight for their liberty, ‘guns, God and gold,’ while they scream NO to affordable health care. They do not know whom the Heritage Foundation, Cato Institute or the Koch brothers are, and have no idea the oil industry is pushing their agenda on them in the guise of preserving personal liberty.

MORE HERE

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REPORT: How Koch Industries Makes Billions By Demanding Bailouts And Taxpayer Subsidies (Part 1)

Think Progress- By Lee Fang on Mar 1st, 2011 at 1:00 pm

Koch Industries, the international conglomerate owned by Charles and David Koch, is not only the second largest private company in America, it is the most politically active. As ThinkProgress has carefully documented over the last three years, Koch groups have spent tens of millions to influence government policy — from financing the Tea Parties, to funding junk academic studies, to undisclosed attack ads against Democrats, to groups promoting climate change denial, to a large network of state-based and national think tanks. In an opinion column for the Wall Street Journal today, Koch Industries CEO Charles Koch fired back at his critics, who have grown more vocal as it has become clear that Koch groups are providing the political muscle for Gov. Scott Walker’s (R-WI) union-busting power grab.

In his piece, Charles portrays himself as simply an ideological advocate, and says his money to political groups is only meant to “enhance true economic freedom.” He chides special interests that have “successfully lobbied for special favors,” claiming “crony capitalism is much easier than competing in an open market.” But in reality, the focus of the Koch political machine is geared towards “crony capitalism” — corrupting government to make Charles and his brother David Koch richer. Koch’s Tea Party libertarianism is actually a thin veneer for the company’s long running history of winning special deals from the government and manipulating the market to pad Koch profits:

– The dirty secret of Koch Industries is its birth under the centrally-planned Soviet Union. Fred Koch, the founder of the company and father of David and Charles, helped construct fifteen oil refineries for Joseph Stalin before expanding the business in the United States.

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New York Billionaires Behind The Tea Party Movement

Posted in Liberaland by Alan • August 23, 2010, 3:20 PMET

The myth of the tea party being a grassroots movement takes another hit, as the New Yorker‘s Jane Mayer looks a the Koch brothers, Charles and David, who fund much of the tea party movement (via Glynnis MacNichol).

The Kochs operate oil refineries in Alaska, Texas, and Minnesota, and control some four thousand miles of pipeline. Koch Industries owns Brawny paper towels, Dixie cups, Georgia-Pacific lumber, Stainmaster carpet, and Lycra, among other products. Forbes ranks it as the second-largest private company in the country, after Cargill, and its consistent profitability has made David and Charles Koch—who, years ago, bought out two other brothers—among the richest men in America. Their combined fortune of thirty-five billion dollars is exceeded only by those of Bill Gates and Warren Buffett.

The Kochs are longtime libertarians who believe in drastically lower personal and corporate taxes, minimal social services for the needy, and much less oversight of industry—especially environmental regulation. These views dovetail with the brothers’ corporate interests. In a study released this spring, the University of Massachusetts at Amherst’s Political Economy Research Institute named Koch Industries one of the top ten air polluters in the United States. And Greenpeace issued a report identifying the company as a “kingpin of climate science denial.” The report showed that, from 2005 to 2008, the Kochs vastly outdid ExxonMobil in giving money to organizations fighting legislation related to climate change, underwriting a huge network of foundations, think tanks, and political front groups. Indeed, the brothers have funded opposition campaigns against so many Obama Administration policies—from health-care reform to the economic-stimulus program—that, in political circles, their ideological network is known as the Kochtopus.

Mayer’s article discusses some ugly family roots. Father Fred did business with Stalin, but later came to regret it, and became  one of the original members of the John Birch Society.

He wrote admiringly of Benito Mussolini’s suppression of Communists in Italy, and disparagingly of the American civil-rights movement. “The colored man looms large in the Communist plan to take over America,” he warned. Welfare was a secret plot to attract rural blacks to cities, where they would foment “a vicious race war.” In a 1963 speech that prefigures the Tea Party’s talk of a secret socialist plot, Koch predicted that Communists would “infiltrate the highest offices of government in the U.S. until the President is a Communist, unknown to the rest of us.”

Mayer’s piece discusses the links between Fred’s views and those of his sons. Buried deep in the article  is an example of how money trumps everything. David Koch, a prostate cancer survivor, has given generously to cancer research.

Koch’s corporate and political roles, however, may pose conflicts of interest. For example, at the same time that David Koch has been casting himself as a champion in the fight against cancer, Koch Industries has been lobbying to prevent the E.P.A. from classifying formaldehyde, which the company produces in great quantities, as a “known carcinogen” in humans.

SOURCE

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Koch Industries founded Americans for Prosperity, formed as a successor to Citizens for a Sound Economy. Fred Koch co-founded the John Birch Society. In the mid-1970s the Kochs started to fund a network of libertarian organizations including the United States Libertarian Party, for which David ran as the vice presidential nominee in 1980.[47][48] The Kochs withdrew their financial support of the Libertarian Party after an acrimonious 1983 convention,[49] but continue to support libertarian institutions independent of the party such as the Cato Institute, and more recently have been major contributers to the Tea Party movement.

To advance the work of the Republican Governors Association, Koch Industries made a $1 million donation to the group in 2010

WIKIPEDIA: MORE INFO ON THE KOCH BROTHERS

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