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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.

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Let’s go back in time to this great article:

The powerful Koch boys from Kansas

Bill Berkowitz

WorkingForChange

02.09.06

Last year, in a move that does not bode well for the nation’s forests, the Koch brothers of Kansas engineered a $13.2 billion buyout of forest products producer Georgia Pacific Corporation, making their company, Koch Industries, the nation’s largest privately held company.

According to the Toronto Globe and Mail, Koch’s purchase of Georgia Pacific would vault Koch past food producer Cargill Inc. as the largest privately held company in the United States, with $80-billion in revenue and 85,000 employees in 50 countries.

The Koch Boys from Kansas are smart, focused, and incredibly wealthy. For years they’ve been pushing both a libertarian and free-market agenda through tens of millions of dollars in contributions to conservative causes, candidates and organizations.

In a way, the Georgia Pacific acquisition “completes the circle” for Koch, Scott Silver told me in an e-mail interview. “The ideologues running the land management agencies are the product of the think tanks created by, and funded by, the Koch family,” Silver, the executive director of the environmental group Wild Wilderness, pointed out.

“Those ideologues are now in a position to permit Koch’s newest acquisition, Georgia-Pacific, to further rape and pillage the public’s lands. These think tanks promote the Free-Market ideal when it serves their interests to do so, but in reality, they are firmly committed to the ideal of enriching private interests at enormous direct cost to the American taxpayer.”

The Koch (pronounced “coke”) brothers, Charles, David, William and Frederick are sons of Kansas. Thirty-eight years ago, Charles took over the company from his father, company founder Fred Koch. According to a recent piece in Business Week, Charles, 70, and David, 65, now “own the bulk of the company after elbowing out their other brothers … in 1983,” buying out William and Frederick for $470 million and $320 million, respectively. In 1998, in a chilling display of family disunity, “the two sets of brothers walked silently past one another in court as William and Frederick lost a lawsuit to extract more money from Charles and David.”

In 1940, Fred Koch founded the company as an oil refiner. A graduate of MIT, he was an original member of the anticommunist ultra-conservative John Birch Society, founded in 1958. The sons did not fall far from the tree: Both Charles and David graduated from MIT and have been deeply involved in conservative politics.

According to “Axis of Ideology,” a 2004 report by the National Committee on Responsive Philanthropy, the two dominant Koch boys have “a combined net worth of approximately $4 billion, placing them among the top 50 wealthiest individuals in the country and among the top 100 wealthiest individuals in the world in 2003, according to Forbes.”

MORE HERE

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And, this article:

Koch’ed Up

2011 March 12
by Cowboy Dre

Koch Brothers Increased Wealth by $9 Billion Last Year As They Fund Laws to Make Working Class Poorer | Buzzflash

Based on a recent Forbes survey, Rachel Maddow revealed that while Wisconsin Gov. Scott Walker is stripping away the financial security of workers, the Koch brothers increased their wealth by $9 billion last year. Together, Maddow notes, they would rank as the fourth-wealthiest person ($44 billion) in the world.

Meanwhile, the Koch brothers and Karl Rove, among others, are using front organizations to pit working people, who are being exploited, against unions. It’s the ultimate in class warfare: make the working class fight each other over an increasingly smaller piece of the financial pie, as the super wealthy run off with the bakery.

That’s why ads in Wisconsin – and stories on Fox – are trying to get Wal-Mart low-wage workers to resent that union members receive better benefits, which of course – on a logical level – reinforces to many of us exactly why unions are needed: to prevent the impoverishment of people who labor for a living.

What’s not mentioned in these ads, or the right-wing media echo chamber, is why the government is subsidizing the wealthy who don’t pay their fair share.
More…

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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.

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How the Koch Brothers Fund the Climate Change Denial Machine

Triple Pundit

By Gina-Marie Cheeseman | March 18th, 2011 

The Koch brothers, owners of Koch Industries are major funders of organizations that create propaganda which denies the reality of climate change. David Koch expressed doubts to the New Yorker magazine last year that climate change is caused by human activity. He also extolled the benefits of climate change, if it happens, stating that it would result in longer growing seasons in colder climates. “The Earth will be able to support enormously more people because far greater land area will be available to produce food,” he said.

The Koch Industries website contains an article that begins by claiming that the company practices environmental stewardship. A couple of paragraphs down, the article states that the company also believes “over-zealous environmental regulation can be destructive.” The article goes on to criticize measures that would reduce greenhouse gas (GHG) emissions.

Greenpeace released a report last year about the Koch foundations supporting organizations that oppose “progressive clean energy and climate policy.” Koch gave $24.9 million from 2005 to 2008 to “organizations of the climate denial machine,” the report states.

The American Legislative Exchange Council (ALEC), a conservative think tank, is one of the organizations that has benefited from Koch money. According to Greenpeace, ALEC’s total grants from 1997 to 2008 from the Koch foundations were $408,000.

The ALEC published a whitepaper titled, EPA’s Regulatory Train Wreck: Strategies for State Legislators. The whitepaper states that the “highest priority should be to get the state on record as calling on Congress to stop this regulatory train wreck.” It cites the “Resolution Opposing EPA’s Regulatory Train Wreck” as a model resolution. Wyoming and Indiana adopted the resolution this year.

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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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